Health Insurance Trending Toward High Deductibles

Menlo Park, CA, Sept. 25, 2008--Employers' health-insurance premiums grew a relatively modest 5 percent in 2008, but employers and workers still are struggling to absorb a more than doubling of their coverage costs since the late 1990s, according to a widely tracked survey.

The total average premium was $12,680 for families and $4,704 for single coverage this year, according to a report from the Kaiser Family Foundation and the Health Research & Educational Trust.

Employers typically pay most of the premium costs. Their contributions to premiums ballooned 119 percent to $9,325 this year, up from an average $4,247 in 1999, the first year that the annual survey tracked.
 
Since the early 2000s, employers have been passing on more of the increased costs in the form of higher worker premiums, deductibles, co-payments and coinsurance. But workers' rising health costs have far outstripped wage gains and general inflation.

Workers' share of premiums, which they pay out of their paychecks, jumped 117 Percent to an average $3,354 this year compared with nine years ago, when they were $1,543, the survey found. Their earnings grew 34 percent since 1999 while general inflation rose 29 percent.

Employer-sponsored coverage is moving toward "less comprehensive, skimpier insurance for working people with higher deductibles and higher out-of-pocket costs," especially among small firms, said Drew Altman, president of the Kaiser Family Foundation.

"The rate of increase in premiums is not an outsize one like we've seen in the past, but the long-term picture is absolutely unchanged. Over the last 10 years premiums have risen three and a half times faster than wages. That's why people are feeling the pain, and that's why they tell us paying for health care and health insurance is one of their top economic problems today."

Last year, employers' health-insurance premiums grew 6.1%, the previous Kaiser survey found.

The nature and scope of coverage is changing, as more workers enroll in plans with deductibles of at least $1,000 for singles. Enrollment in high-deductible health plans with a savings option, such as health reimbursement arrangements (HRA) and health savings accounts (HSAs), grew to 8 percent this year from 5 percent last year.

That means 5.5 million workers now have such plans, with about three out of five participating in HSA-eligible plans, which allow workers to sock away pretax money in investment options to pay for qualified health-care expenses.

The shift to high deductibles has been most dramatic for workers in small businesses with three to 199 workers, where 35 percent of covered workers must pay at least $1,000 out of pocket before their plans kicks in and picks up at least a portion of the bills, up from 21 percent last year.