Employer-Sponsored Family Health Premiums Rise

According to the Kaiser Family Foundation/Health Research & Educational Trust (HRET) “2013 Employer Health Benefits Survey,” workers on average this year paid $4,565 toward the cost of their coverage. During the same period, workers’ wages and general inflation were up 1.8% and 1.1%, respectively.

This year’s rise in premiums remains moderate by historical standards. Since 2003, premiums have increased 80%, nearly three times as fast as wages (31%) and inflation (27%).

“We are in a prolonged period of moderation in premiums, which should create some breathing room for the private sector to try to reduce costs without cutting back benefits for workers,” said Kaiser President and CEO Drew Altman.

The survey shows that firms with many lower-wage workers (at least 35% earning $23,000 or less annually) require workers to pay $1,363 more on average toward family premiums than workers at firms with fewer lower-wage workers ($5,818 vs. $4,455 annually). The lower-wage firms on average offer less costly coverage too, creating a large disparity in the share of the premium that their workers pay (39% vs. 29%).

This year, 78% of all covered workers face a general annual deductible, up from 72% in 2012. Workers typically must pay this deductible before most services are covered by their health plan. The average deductible this year for worker-only coverage is $1,135, similar to the $1,097 average deductible in 2012.

The survey also found large deductibles of at least $1,000 or more are common in employer-sponsored plans, especially among workers of smaller firms. This year, 38% of all covered workers face such a deductible. At small firms, 58% of covered workers now face deductibles of at least $1,000, including nearly a third (31%) who face deductibles of at least $2,000, up from 12% in 2008.

Wellness Programs and Financial Incentives

Employee wellness programs are a popular strategy for employers trying to control costs. In 2013, 35% of employers say they are a very effective strategy for controlling costs, a larger share than says the same about any other strategy, including disease management (22%), consumer-driven health plans (20%) or higher cost sharing (17%).

Nearly all large employers (at least 200 workers) offer at least one wellness program, which can take many forms and target a wide range of conditions. More than one-third (36%) of large employers who offer wellness programs offer some kind of financial incentive for workers to participate, such as lower premiums or a lower deductible, receiving a larger contribution to a tax-preferred savings account, or gift cards, cash or other direct financial incentives.

Among large firms offering health benefits, more than half (55%) offer some kind of biometric screenings to measure workers’ health risks. Of these, 11% reward or penalize workers financially based on whether they achieve specific biometric outcomes.

Implications for the ACA

The Patient Protection Affordable Care Act (also known as the ACA) includes provisions that allow broader use of financial incentives to encourage workers to improve their health status and outcomes.

“This will be an important issue to watch next year, as employers will have more flexibility and could ask workers to pay more because of their lifestyles and health conditions,” said Kaiser Vice President Gary Claxton, the survey’s lead investigator and director of the Foundation’s Health Care Marketplace Project.

The survey also found 36% of covered workers are in “grandfathered” plans as defined by the ACA, down from 48% last year. The shift means a rising share of workers will benefit from some of the health law’s reforms affecting the employer market, such as covering preventive benefits without cost sharing and offering an external appeals process. Grandfathered plans, which were in place before the law’s passage, are exempt from these provisions. Plans lose their grandfathered status if they make significant changes to reduce benefits or raise workers’ costs.

The slow growth in premiums also means fewer employer plans are likely to be subject to the ACA’s high-cost plan tax that takes effect in 2018, according to the survey. The Congressional Budget Office recently reduced its estimate of the number of plans that would trigger the tax, and a continued low growth rate could further reduce the impact of this provision.

For the first time, the survey asked large employers about their interest in private health insurance exchanges, a relatively new concept that pulls together a wide range of insurance plans which participating employers can offer to their workers to choose from. Though relatively few chose this option in 2013, 29% of those with at least 5,000 workers say they are considering offering benefits through a private exchange in the future. These jumbo firms employ almost 40% of all covered workers, so their interest could portend a significant shift in the way many people get their health insurance in the future.

Offer Rates

Offer rates have remained relatively stable. This year, the survey finds 57% of firms offer health benefits to their workers, which is statistically unchanged from the 61% in 2012 and 60% in 2011. As in the past, the larger an employer is, the more likely it is to offer health benefits, with nearly all firms with at least 200 workers offering health benefits to at least some of its workers.

Since most firms in the country are small, variation in the overall offer rate is driven primarily by changes in the percentages of the smallest firms (three to nine workers) offering health benefits (45% in 2013, similar to the 50% that did so in 2012). Also, firms with many low-wage workers are significantly less likely to offer health insurance than firms with few low-wage workers (23% and 60%, respectively).

The survey was conducted between January and May of 2013 and included 2,948 randomly selected, non-federal public and private firms with three or more employees, 2,067 of which responded to the full survey and 881 of which responded to a single question about offering coverage.

The full survey results and an accompanying summary can be found here.