Annual premiums for employer-sponsored family health coverage in the U.S. reached $16,351 in 2013, up 4 percent from 2012, with workers paying an average of $4,565 toward the cost of their coverage, according to the nonprofit Kaiser Family Foundation/Health Research & Educational Trust (HRET) 2013 Employer Health Benefits Survey.
During the same period, workers’ wages and general inflation jumped 1.8 percent and 1.1 percent, respectively.
The recent rise in premiums remains moderate by historical standards. Since 2003, premiums have increased 80 percent, nearly three times as fast as wages (31 percent) and inflation (27 percent).
“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,” commented Kaiser President and CEO Drew Altman.
The 15th annual Kaiser/HRET survey of more than 2,000 small and large U.S. employers revealed that in 2013:
- Firms with many lower-wage employees (at least 35 percent earning $23,000 or less annually) require workers to pay an average of $1,363 more toward annual family premiums than employees at firms with fewer lower-wage workers ($5,818 vs. $4,455).
- Lower-wage companies, on average, offer less coverage (lowering the overall premium), but there is a large disparity in the share of the premium that their workers pay (39 percent at lower-wage firms vs. 29 percent at higher-wage companies).
- The general annual deductible among all covered workers is 78 percent, up from 72 percent in 2012. Employees typically must pay this deductible before their health plan will cover most services.
- The average deductible for worker-only coverage is $1,135, barely higher than the $1,097 average deductible in 2012.
- Among all covered workers, 38 percent have a deductible of at least $1,000. At small organizations, 58 percent of covered employees must meet a deductible of at least $1,000, including nearly a third (31 percent) who face a deductible of at least $2,000, up from 12 percent in 2008.
Employee wellness programs are a popular strategy for employers trying to control costs. In 2013, 35 percent of employers said these programs are a very effective strategy for controlling costs, a larger share than said the same about any other strategy, including disease management (22 percent), consumer-driven health plans (20 percent) and higher cost sharing (17 percent).
Nearly all large organizations (at least 200 workers) offer at least one wellness program, which can take many forms and target a wide range of conditions.
More than a third (36 percent) of large employers that offer wellness programs provide a financial incentive for participants, such as lower premiums or a lower deductible, a larger company contribution to a tax-preferred health savings account, or gift cards, cash or other direct financial incentives.
Among large firms offering health benefits, more than half (55 percent) provide some kind of biometric screenings to measure workers’ health risks. Of these, 11 percent reward or penalize employees financially based on whether they achieve specific biometric outcomes.
The Patient Protection and Affordable Care Act (ACA) includes provisions that allow broader use of financial incentives tied to wellness programs. A final rule issued earlier this year implements ACA provisions that increase the maximum permissible reward or penalty from 20 percent to 30 percent of the total annual cost (premiums) of individual-only coverage. The maximum reward or penalty for wellness programs designed to prevent or reduce tobacco use rises to 50 percent of the cost of individual-coverage premiums.
“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 study’s lead investigator and director of the foundation’s Health Care Marketplace Project.
The survey also revealed that 36 percent of covered workers are in grandfathered plans as defined by the ACA, down from 48 percent last year. The shift means that a rising share of employers will have to comply with the health law’s requirements for nongrandfathered group plans, 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 that fewer employer plans are likely to be subject to the ACA’s high-cost Cadillac plan tax. Starting in 2018, health plan coverage that costs more than $10,200 for an individual or $27,500 for dependent coverage will be subject to a 40 percent nondeductible excise tax. 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 that participating companies can offer to their workers. Though relatively few chose this option in 2013, 29 percent of those with at least 5,000 workers say they are considering offering benefits through a private exchange. These jumbo firms employ almost 40 percent of all covered workers, so their interest could portend a significant shift in the way many people get their health insurance in the future.
In 2013, 57 percent of firms offered health benefits to their workers—a statistically insignificant change from the 61 percent in 2012 and 60 percent 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 employees.
Since most firms in the U.S. are small, variation in the overall offer rate is driven primarily by changes in the percentages of the smallest firms (3-9 workers) offering health benefits (45 percent in 2013, similar to the 50 percent that did so in 2012). Also, firms with many low-wage workers are significantly less likely to offer health insurance than those with few low-wage workers (23 percent and 60 percent, respectively).
The survey was conducted from January through May 2013 and included 2,948 randomly selected nonfederal public and private firms with three or more employees.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Related External Article:
First Obamacare Open Enrollment Promises More Incentives and Costs, Reuters, August 2013
Related SHRM Articles:
Start Communicating About Health Care Changes, SHRM Online Benefits, August 2013
Employers Respond to PPACA's Financial Impact, SHRM Online Benefits, August 2013
Managing Health Care Costs, SHRM Toolkit, July 2013
Health Premium Growth Moderating as Employees Pay Larger Share, SHRM Online Benefits, June 2013
Study: 6.5% Growth in Medical Costs for 2014, SHRM Online Benefits, June 2013
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