Why slow growth isn't really good news

When you look at the general trajectory of premium costs relative to workers’ earnings over the past 15 years, you see nothing but bad news. Costs are going up at a steep angle while wages are relatively flat.

However, what should-in theory-be good news for American workers is the moderate rise in family coverage premiums from last year to this year: just 4%.

The Kaiser Family Foundation (KFF)/Health Research & Educational Trust (HRET) 2013 survey reported last month that annual premiums for employer-sponsored family health coverage have reached $16,351, with workers paying $4,565 toward that total. KFF President and CEO Drew Altman says the historically low increase should be a bit of a relief to employers that would otherwise consider cutting back on benefits.

“It is absolutely, objectively a very moderate increase,” he said at a press conference announcing the survey results.

In fact, in recent years, the KFF/HRET report shows a prolonged period of modest premium growth. This year’s 4% figure for families as well as the 5% premium increase for individual-worker coverage include the net factors that went into the final premium, such as plan choice, benefit changes and cost-sharing adjustments.

Altman also said that the good news unfortunately isn’t resonating with workers, and who can blame them. While recent numbers are significantly lower than the 10% or 18% hikes in the past, workers are still seeing out-of-pocket costs and their own personal contribution to premiums go up.

Since 2003, premiums have increased 80%. Since 1999, premiums are up 182% with workers’ contributions rising 196%. In the meantime, earnings since 1999 are only up 50%, according to KFF/HRET.

“The American people never really share in this sense of moderation,” Altman said.

Among those surveyed by KFF, 53% believe-erroneously-that premiums are going up faster than usual, and only 3% believe the trend is slower.

“The whole fight in healthcare costs is about the increase,” he said.

While KFF does not have data on what is causing the premium moderation, Altman said cost sharing and payment reforms are possibly playing a role, but on the other hand, mergers in the marketplace are pushing costs higher. In general, he says, the sluggish economy has been the main influence, bringing down utilization of health services and thus overall spending.

Better deal overall

Industry observers are more interested in tracking the premium rates for those in the exchange markets since they’re still in their infancy. It’s not clear whether exchange enrollees will be getting a better deal overall than their employer-sponsored counterparts. And it depends on your idea of what constitutes a better deal.

According to KFF in separate research, the average exchange subsidy will be $2,672 for an individual purchasing the lowest-cost silver plan-a 32% reduction from the top-line price. The average subsidy for a family purchasing the lowest-cost silver plan would be $5,548, or 66% of the top-line price.

Although it’s not comparing apples-to-apples, you know instinctively that employer contributions to workers’ plans are more substantial than what government subsidies are going to offer exchange members. KFF/HRET found that employers pay 82% of premiums for single coverage and 71% for family coverage. Again, not a direct comparison since the exchange plans could be quite different, but you get the picture.

One might argue that exchange enrollees have more choices of plan design and price points than your typical employer plan enrollee, and that’s a clear advantage. The KFF/HRET report noted that 87% employers that offer health benefits only offer one type of health plan. It’s not a stretch to say that 100% of those shopping on the exchanges will have multiple choices with varied prices.

No doubt the average American family will have strong feelings about whether their health plan is a better deal than what the neighbors next door have.