Workplace premiums experience modest rise

Healthcare premiums are climbing at historically slow rates, but this is due, in part, because of the fast rise in deductibles workers are paying out, according to the benchmark Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2016 Employer Health Benefits Survey.

The family premium in 2016 for employer-sponsored health insurance rose an average of 3% to $18,142 this year, a modest increase at a time when workers’ wages (2.5%) and inflation (1.1%) also grew modestly. Workers contribute on average $5,277 a year toward their family premiums, according to the survey.

This year’s low family premium increase is similar to last year’s (4%) and reflects a significant slowdown over the past 15 years.

Wedig

“I am struck by the continued migration of people toward the use of high-deductible plans and the general increase in deductibles,” says Gerry Wedig, professor at Simon Business School at the University of Rochester.

The recent trend, to a certain extent, reflects covered workers moving into high-deductible plans compatible with health savings accounts (HSAs) or tied to health reimbursement arrangements (HRAs), which are said to have lower average premiums than other plan types. In 2016, 29% of all workers were in these types of plans, up from 20% in 2014, while a smaller share of workers (48% in 2016, down from 58% in 2014) are enrolled in preferred provider organization (PPO) plans, which have higher-than-average premiums, according to the survey. These shifts effectively reduced the average premium increase by half a percentage point in each of the past two years, the analysis shows.

Again, partly as a result of this trend, the survey finds average deductibles continuing to rise for covered workers. In 2016, 83% of covered workers face a deductible for single coverage, which averages $1,478. That’s up $159 or 12% from 2015, and $486 or 49% since 2011. The average deductible for workers who face one is higher for workers in small firms than in large firms.

Half of all covered workers face deductibles of at least $1,000 annually for single coverage; this includes two thirds (65%) of workers at small firms, who typically face higher deductibles than workers at large firms.

In some cases, employers make contributions to tax-preferred HSAs or HRAs, which workers can use to pay part or all of their deductible expenses, thereby reducing their effective deductible, according to the survey.

“Premiums continue to grow faster than inflation although not massively so,” Wedig says. “The Affordable Care Act [ACA] does not affect large companies and/or companies that pay high wages other than some reporting requirements-it doesn’t affect most of employment. It negatively impacts firms on the low end of the wage scale, mostly small firms, because it forces them to substitute benefits for wages or in some cases to restructure work or not hire people. It also contracts labor supply at the low wage end because people are giving up benefits and subsidies if they work and earn more money. This also hurts low-wage employers.”

In regard to employers and health insurance, special attention should be paid to the impact on small firms with lower-wage employees and quantifying the impact of the ACA on them, according to Wedig.

“High-deductible plans seem to be a growing market,” he says. “Employers are still struggling to find a way to contain costs of the healthcare benefit and are looking for solutions.”