Health Affairs, 25, no. 6 (2006): w476-w485 (Published online 26 September 2006) doi: 10.1377/hlthaff.25.w476 © 2006 by Project HOPE	New Online   Senate Health Reform Bill   Rewarding Providers   Public Option Policy Brief   Health Reform & Abortion   Delivery System Reform

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Health Benefits In 2006: Premium Increases Moderate, Enrollment In Consumer-Directed Health Plans Remains Modest

Abstract

 
Based on a survey of 2,122 randomly selected public and private employers, this paper reports on the state of employer-sponsored health insurance in spring 2006, including recent changes. Premiums increased 7.7 percent from spring 2005 to spring 2006 and have risen 68 percent since 2001. About 4 percent of workers are enrolled in high-deductible health plans with savings options. The percentage of workers covered by their own employer did not statistically change from 2005 to 2006.

Study Data And Methods

Top Study Data And Methods Study Findings Concluding Comments NOTES

 
Data. The annual Kaiser/HRET employer health benefits survey draws its sample from a listing of U.S. firms compiled by Dun and Bradstreet. Employers range in size from three to hundreds of thousands of workers and include public and private firms. The sample is stratified by size and industry. In 2006 our overall response rate was 48 percent, which includes firms that do and do not offer health benefits. Among firms that offer health benefits, the survey’s response rate was 50 percent.

Using computer-assisted telephone interviewing, National Research LLC interviewed employee benefit managers from January through May 2006. The 2006 sample consists of 2,122 firms that completed the entire survey, 67 percent of which also participated in the survey in either 2004 or 2005 or both. Prior surveys indicate that firms not offering benefits are less inclined to participate in the survey than those that do offer benefits. Therefore, we asked one question of firms that declined to participate in the full survey: "Does your company offer or contribute to a health insurance program as a benefit to your employees?" A total of 1,037 additional firms answered this question. The response rate for this one question was 72 percent.

Methods. Sampling weights were determined by calculating the basic firm weight (that is, the firm’s chance of being selected for the sample). We then adjusted the basic weight for nonresponse bias, followed by the trimming of overly influential weight values. Finally, we applied a poststratification adjustment based on the Statistics of U.S. Businesses compiled by the U.S. Census Bureau.² All data presented in the paper use either a firm weight, a worker weight, or a covered-worker weight. Estimates shown by plan type are weighted based on the number of workers covered in those plan types. We used the statistical software package SUDAAN (Release 9.0.1) when calculating standard errors, to adjust for the design effects of the survey. All analyses used weighted data, and all differences discussed in the text are significant at the .05 level unless otherwise noted.

Survey questions. Elements of the questionnaire used in the Kaiser/HRET survey are similar to questions asked in previous surveys conducted at the Health Insurance Association of America (HIAA) during 1987–1990 and KPMG Consulting (now Bearing Point) during 1991–1998. Thus, for several key questions, there are nineteen years of data available for making statistical estimates and comparisons. These survey elements include data on the firm’s largest conventional, health maintenance organization (HMO), preferred provider organization (PPO), and point-of-service (POS) plans. In 2006 the survey team began asking employers if they had a health plan that was an exclusive provider organization (EPO). We treat EPOs and HMOs together as one plan type and report the information under the banner of "HMO"; if employers sponsor both an HMO and an EPO, they are asked about the attributes of the plan with the larger enrollment.

Starting this year, we have included a new plan type, which is a high-deductible health plan with a savings option (HDHP/SO). This option includes health plans with high deductibles (at least $1,000 for single coverage and $2,000 for family coverage) that (1) are offered with a health reimbursement arrangement (HRA) or (2) are eligible to be offered with a health savings account (HSA).³ We reported some attributes of these plans in both the 2004 and 2005 survey results; beginning this year, we report information on HDHP/SOs on the same basis as PPO, HMO, and POS plans. Because of falling market share, this year we also greatly reduced the amount of information collected and reported about conventional plans (that is, health plans with no networks).

Study Findings

Top Study Data And Methods Study Findings Concluding Comments NOTES

 
The cost of coverage. Premium increases. The average premium for family coverage rose 7.7 percent from spring 2005 to spring 2006 (Exhibit 1). This is the third consecutive year in which the rate of premium growth declined when compared with the previous year.⁴ It represents the lowest rate of premium increase since 2000.⁵ Nonetheless, the 7.7 percent premium increase outpaced both overall inflation and increases in workers’ wages by about four percentage points.⁶ Since 2001, health insurance premiums have risen 68 percent.

View larger version (20K): [in this window] [in a new window] EXHIBIT 1 Increases In Health Insurance Premiums Compared With Other Economic Indicators, 1993–2006

The average annual cost for single and family coverage, including employer and employee contributions, was $4,242 and $11,480, respectively (Exhibit 2). Premiums for covered workers in HDHP/SOs are lower than premiums for covered workers in each of the other plan types for both single and family coverage.⁷

View larger version (19K): [in this window] [in a new window] EXHIBIT 3 Distribution Of Covered Workers By Their Percentage Premium Contribution For Single And Family Coverage, By Firm Size, 2006

Workers also see much variation in deductibles, both within and across plan types (Exhibit 4). For example, in PPOs, the most common plan type, nearly a third of covered workers are in plans without a general plan deductible for single coverage, while 8 percent are in plans with general deductibles of $1,000 or more for single coverage. The average deductible for covered workers with single coverage in PPO plans is $327 (including people with a zero deductible), which is essentially unchanged from 2005. Consistent with previous years, there are differences across firm sizes: Covered workers with PPOs in small firms (3–199 workers) have an average deductible of $465 for single coverage, compared with $260 for covered workers in large firms (200 or more workers). These deductible amounts are for in-network services.

View larger version (16K): [in this window] [in a new window] EXHIBIT 4 Distribution Of Covered Workers By In-Network Deductible Amounts For Single Coverage, By Plan Type, 2006

View larger version (28K): [in this window] [in a new window] EXHIBIT 6 Health Plan Enrollment By Covered Workers, By Plan Type, Selected Years 1988–2006

Availability of coverage. In 2006, 61 percent of firms offer health benefits (Exhibit 7), similar to the 60 percent offer rate for 2005. Firms with 200 or more workers continue to be much more likely to offer health benefits than the smallest firms (3–9 workers). As we have seen in previous years, firms with a high proportion of lower-paid workers are less likely to offer health benefits than firms with a more highly paid workforce: 42 percent of firms where at least 35 percent of workers earn $20,000 or less offer health benefits to their workers, compared with 65 percent for firms with a smaller proportion of low-wage workers (data not shown). Among firms that offer health benefits, 65 percent of workers are covered by health benefits through their own firm. Looking more broadly at both workers in firms that offer health benefits and those in firms that do not, 59 percent of workers are covered by health benefits through their own firm, a similar percentage to last year but lower than the percentage covered (65 percent) in 2001.

View larger version (13K): [in this window] [in a new window] EXHIBIT 7 Percentage Of Firms Offering Health Benefits, By Firm Size, 1999–2006

Exhibit 8 shows the average premiums, workers’ premium contributions, HRA or HSA contributions by employers, and deductible amounts for covered workers in HDHP/HRAs and HSA-qualified HDHPs. Premiums for covered workers in HDHP/SOs are lower than premiums for other plan types for both single and family coverage, which is not surprising given the higher deductibles in HDHP/SOs. Premiums for covered workers in HSA-qualified HDHPs are also lower than the premiums for covered workers in PPO, HMO, and POS plans for both single and family coverage (see Exhibit 2). The premiums for HDHP/HRAs also generally are lower than premiums for other plan types, but the differences in family premiums between HDHP/HRAs and HMO plans and POS plans are not statistically significant.

Employers’ contributions to HRAs and HSAs for covered workers in 2006 are similar to 2005 contribution levels. Thirty-seven percent of firms offering HSA-qualified HDHPs do not offer to make contributions to HSAs established by their workers, a similar percentage as in 2005.¹²

The average deductible amounts for covered workers with single coverage ($1,442 for HDHP/HRAs and $2,011 for HSA-qualified HDHPs) are similar to the averages we reported for covered workers in such plans in 2005 (Exhibit 8).¹³ This year we changed the way we collect and report deductibles for family coverage for all plan types, including HDHP/SOs. We asked employers whether the family deductible amount is (1) an aggregate amount (that is, the out-of-pocket expenses of all family members are counted until the deductible is met) or (2) a separate, per person amount that applies to each family member (typically with a limit on the number of family members that would be required to meet the deductible).¹⁴ For HDHP/SOs, a large majority of respondents reported that covered workers face aggregate family deductibles, so these are the average amounts ($2,985 for HDHP/HRAs and $4,008 for HSA-qualified HDHPs) shown in the exhibit.¹⁵ Because of this change in the way we collect and report family deductible averages, the amounts that we report for 2006 are not comparable to the amounts that we reported for 2005.

Although deductibles in HDHP/SOs are substantial, many covered workers are in plans that do not apply preventive benefits to the deductible. Seventy-four percent of workers enrolled in HDHP/HRAs and 82 percent of workers enrolled in HSA-qualified HDHPs are in a plan that carves out preventive benefits. Forty percent of workers enrolled in HDHP/HRAs are in a plan that does not apply prescription drug costs to the deductible.

Employers’ attitudes and views about the future. Each year we ask employers about their views on the effectiveness of various forms of cost containment. These views have changed very little over the past several years. Among firms that offer and do not offer health benefits, few employers say that any of the suggested approaches are likely to be "very effective" at controlling health care costs (16 percent for consumer-directed health plans, 17 percent for disease management, 15 percent for higher employee cost sharing, and 9 percent for tightly managed care networks). Large percentages of employers (35–44 percent) continue to believe that each of these approaches is "somewhat effective" in controlling costs. Employers with 200 or more workers are much more likely (28 percent) than smaller employers (17 percent) to view disease management as a "very effective" cost containment approach. Larger employers also are much more likely (55 percent) to have disease management as a component of their largest health plan (compared with 25 percent for firms with 3–199 workers).

A relatively low percentage of employers report that they are "very likely" to increase employee cost sharing next year (12 percent "very likely" to increase deductibles; 8 percent "very likely" to increase copayments or coinsurance for office visits; 10 percent "very likely" to increase cost sharing for prescription drugs; and 21 percent "very likely" to increase the amount employees pay for premiums). Relatively small percentages of employers not currently offering an HDHP/SO plan say that they are "very likely" to do so next year; 6 percent of employers not offering an HDHP/HRA say that they are "very likely" to do so next year, and only 4 percent of employers not offering an HSA-qualified HDHP say that they are "very likely" to do so next year.

Concluding Comments

Top Study Data And Methods Study Findings Concluding Comments NOTES

 
Premium growth in 2006 was several percentage points lower than we have seen in recent years, providing a partial reprieve for employers and employees from the growing affordability problems that the Kaiser/HRET surveys have documented over the past several years. Premium increases are still outstripping inflation and wage growth, but the 7.7 percent growth rate is the lowest seen since 2000. How long this downward trend in premium increases will last, however, is uncertain—we have seen in the past that periods of moderating premium trends are soon followed by periods of escalating rates of increase. One factor that could extend the downward trend would be the widespread adoption of higher-deductible health plans, which generally have lower premium levels than other coverage options. Consumer-directed health plans continue to receive substantial attention in policy and political circles, but they remain a very small part of plan enrollment. It remains to be seen whether they will attract sizable employer and employee participation.

Editor's Notes

 
Gary Claxton (gclaxton{at}kff.org) is a vice president at the Henry J. Kaiser Family Foundation (KFF) in Washington, D.C. Jon Gabel is a vice president at the Center for Studying Health System Change (HSC) in Washington. Isadora Gil is a KFF policy analyst. Jeremy Pickreign is an HSC statistician (in Rensselaer, New York). Heidi Whitmore is a researcher at HSC. Benjamin Finder is a KFF research assistant. Bianca DiJulio is a KFF policy analyst. Samantha Hawkins is a research manager at the Health Research and Educational Trust (HRET), also in Washington.

NOTES

Top Study Data And Methods Study Findings Concluding Comments NOTES

 

1. Kaiser Commission on Medicaid and the Uninsured, Health Insurance Coverage in America: 2004 Data Update, November 2005, http://www.kff.org/uninsured/upload/Health-Coverage-in-America-2004-Data-Update-Report.pdf (accessed 14 September 2006).
2. For additional information about trimming overly influential weight values or the development of the weights, see G. Claxton et al., Employer Health Benefits: 2006 Annual Survey, Survey Design and Methods, September 2006, http://www.kff.org/insurance/7527/sections/ehbs06-design-1.cfm.
3. Federal law requires a deductible of at least $1,050 for single coverage and $2,100 for family coverage for HSA-qualified health plans in 2006.
4. Premium-increase figures are based on respondents’ answers to two questions: "How do the total costs for family coverage compare with what they were one year ago?" and "What percentage did costs for family coverage increase (decrease) since last year?"
5. Although the rate of premium increase in 2000 (8.2 percent) appears to be higher than the 7.7 percent increase in 2006, the difference is not statistically significant.
6. The Consumer Price Index (CPI) rose 3.5 percent between April 2005 and April 2006, and workers’ hourly wages increased 3.8 percent for this same period, according to the Bureau of Labor Statistics. The use of the April-to-April time period is consistent with our previous practice. We note, however, that the May-to-May inflation estimate is higher (4.2 percent).
7. This comparison does not include employers’ contributions to HRAs or HSAs.
8. Because of a change in the way the survey asked about deductibles for family coverage this year, the change in family deductibles between 2001 and 2006 cannot be calculated.
9. Because we introduced a new plan type in 2006, comparisons with prior years must be made with some caution. HDHP/SOs are based on other plan types—so in the past they would have been classified as PPO, HMO, POS, or conventional plans.
10. Because of the way we collected enrollment data for HSA-qualified HDHPs and HDHP/HRAs in 2005, we are unable to create standard errors for last year’s enrollment. Using a one-sample t-test on 2006 enrollment estimates, we find that enrollment in HSA-qualified HDHPs is higher in 2006 than in 2005 (p = .0127), but enrollment in HDHP/HRAs is unchanged (p = .2314). A one-sample t-test around the 2006 estimate is not as precise as a two-sample t-test between the two years, and we are slightly less confident about these results.
11. Workers’ contributions for family coverage HDHP/HRAs are significantly lower than such contributions in HMO and POS plans but are not significantly lower than workers’ contributions for family coverage in PPOs. Workers’ contributions for single coverage in HSA-qualified HDHPs and HDHP/HRAs are not significantly different from workers’ contributions for single coverage in each of the other plan types.
12. Average employer contributions to HSAs and HRAs are weighted by covered workers in those plans. The percentage of firms making no contribution to their workers’ HSA or HRA accounts is weighted by employers offering those plan types.
13. The 2005 reported amounts were $1,870 for HDHP/HRA and $1,901 for HSA-qualified HDHP. Differences between these amounts and the 2006 HDHP/SO deductible are not statistically significant.
14. Separate deductible arrangements are less prevalent for HSA-qualified HDHPs because federal law requires that family plans have a minimum deductible of $2,100 in 2006. A plan can apply the deductible separately to each family member if the deductible amount is at least $2,100; in such a case, the plan would have to limit the number of members that are required to meet the deductible to comply with the federal law requirement for the out-of-pocket maximum for cost sharing in HSA-qualified HDHPs.
15. There were not sufficient responses for separate deductible amounts to permit us to report the values.

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