Health insurance premiums hold steady, but future hikes likely

WASHINGTON, D.C-Employer-sponsored health-insurance plan premiums increased only 6% in 2007, less than the last four years. However, insurance costs are rising much faster than inflation and wages, according to a leading survey of employer health benefits. Premiums now average more than $12,000 for family coverage (almost $4,500 for individuals), pricing many workers out of the market.

Moreover, employee contributions for coverage are significantly higher than amounts reported in 2006; they have doubled since 2000 to now average $273 a month, noted Kaiser Family Foundation president Drew Altman in unveiling the 2007 Employer Health Benefit Survey by the Kaiser and Health Research and Educational Trust.

As low wage earners find health benefits too costly, Altman expects the number of uninsured to go up. The result is "growing anxiety on the part of the public" that they will have to pay more for healthcare or insurance, he says, noting that these concerns may move health reform to the top of the political agenda.

At the same time, high-deductible health plans (HDHPs) are not filling the gap. There has been little growth in the number of companies offering such plans, and many employers do not contribute to accompanying health savings accounts.

Even though employees are bearing a greater proportion of the cost of healthcare coverage, they are not shifting to less costly plans. PPOs impose an annual deductible on 71% of covered workers with single coverage, while only 18% of workers in HMOs face that cost. Yet, 57% of covered workers are enrolled in PPOs, compared with 21% in HMOs, a distribution that has changed little in recent years.

CURBING DRUG COSTS

As prescription drug coverage has become a standard component of employer health benefits, more plans are establishing three- and four-tier cost-sharing arrangements to shift consumption to less-costly medicines.

Three-fourths of workers now are enrolled in multi-tier plans with copays averaging $11 for generic drugs, $25 for preferred drugs and $43 for nonpreferred drugs. A small portion (7%) of plans have a fourth tier for lifestyle or specialty biologics that carry copays averaging $71 or coinsurance of 36%.

A shrinking number of workers (16%) still have plans with only two tiers, one for generic drugs ($10 average copay) and another for preferred drugs ($23). Only 6% of covered workers are in plans with the same cost-sharing for all prescription drugs, and many of the no-tier benefits involve high-deductible health plans.

To hold down premiums and other costs, employers are expected to continue to increase the amount of worker contributions to premiums, deductible amounts, cost-sharing for office visits and the amount that employees pay for prescription drugs, a strategy many have been using for the past several years. Only a small number of firms say they will offer new high-deductible health plans, but relatively few firms report that they expect to drop coverage or limit eligibility.