Moderate increase in premiums for job-based family health insurance twice rate for wages
Annual premiums for job-based family health insurance went up just 4 percent this year, but that's no comfort with the price tag approaching $16,000 and rising more than twice as fast as wages.
The annual survey released Tuesday by two major research groups served as a glaring reminder that the nation's problem of unaffordable medical care is anything but solved.
Premiums for a family plan are averaging $15,745, with employees paying more than $4,300 of that. And lower wage workers are paying more for skimpier coverage than their counterparts at upscale firms.
Overall, “it's historically a very moderate increase in premiums,” said Drew Altman, president of the Kaiser Family Foundation, which conducted the survey with Health Research & Educational Trust.
He quickly added: “But even a moderate increase feels really big to workers when their wages are flat or falling.” General inflation rose only 2.3 percent, by comparison.
In the Pittsburgh area, costs for many large employers have remained flat or declined in the last year as the state's largest health insurer, Highmark Inc., has faced increasing competition from four national carriers, experts have said.
Last year, UPMC extended full-access contracts to Aetna Inc., Cigna Corp., United Healthcare and HealthAmerica. Before that move, Highmark was the only insurer in Western Pennsylvania with full access to UPMC, the region's dominant health system.
Highmark this week presented details of new select-network insurance plans, which could be up to 25 percent less expensive but do not provide access to UPMC. Experts said the new network, called Community Blue, will put downward pressure on health insurance premiums in the market.
But Highmark, a nonprofit Blue Cross Blue Shield company, has requested state approval for rate increases of about 10 percent on thousands of its individual and small business customers this year.
Following a 9 percent increase in premiums last year, the 2012 increase quickly became fodder for the political debate. Republicans said President Obama's promises to control health care costs ring hollow in light of the findings.
But the most significant cost-control measures in Obama's law have yet to take effect, along with the president's big push to cover the uninsured. The cost controls include a new tax on the most expensive insurance plans and a powerful board to keep Medicare spending manageable.
Trying to head off critics, the administration issued a report estimating that consumers have saved $2 billion as a result of the health care law. That's because of a combination of insurance rebates for employers and individual policy holders, as well as closer state oversight of proposed rate increases, facilitated by Obama's law.
But hang on to your wallets: The Kaiser survey showed premiums for job-based family coverage have risen by nearly $2,400 since 2009, when Obama took office, with a corresponding increase of nearly $800 for employee-only coverage.
“We aren't happy to see any increase in health insurance premiums,” said Gary Cohen, head of the administration's Center for Consumer Information and Insurance Oversight, adding that officials are “heartened” it was only a modest rise this year and look forward to slowing costs as more provisions of the health care law take effect.
Most independent experts say rising premiums reflect underlying problems with the health care system that have frustrated policymakers of both parties for years, as well as corporate benefit managers.
Indeed, only last week an arm of the National Academy of Sciences estimated that about 30 cents of every dollar spent on health care — $750 billion a year — is wasted through unnecessary procedures, cumbersome paperwork, uncoordinated care and fraud.
Obama says he's working to make health care more affordable for all by leveraging the power of government programs such as Medicare to pay hospitals and doctors for quality results, rather than sheer volume of tests and procedures. But that will take time.
Republican Mitt Romney wants to give future retirees a fixed amount of money to pick either private insurance or a government plan modeled on Medicare. He expects the private market will find ways to deliver quality service at lower cost.
The GOP approach mirrors the shift away from traditional pensions to 401(k) savings plans that limit the employer's exposure.
The Kaiser/HRET survey found that employee-only coverage went up 3 percent this year, with annual premiums averaging $5,615. Companies usually pick up a larger share of the cost for employee-only coverage, so workers typically paid about $950 of that.
The availability of employer-based coverage, the mainstay for working people and their families, remained stable this year, with 61 percent of all companies offering health benefits. However, only half of companies with three to nine workers offered health insurance, while virtually all large firms with 1,000 or more employees did so.
Companies continued shifting costs to their workers, at a somewhat slower pace. A trend toward steering employees into plans with high annual deductibles eased a bit. The deductible is the amount you must pay each year before insurance kicks in. The survey found that 34 percent of workers are in plans with annual deductibles of at least $1,000 for single coverage, up from 31 percent in 2011.
“We don't know if it's a timeout, or if it's reached some natural limit,” Altman said. “It's really something to watch for in the future because (high deductible plans) have an impact both on people's budgets and on holding down overall costs.”
The survey's focus on health insurance provided to lower-wage workers highlights one of the major areas of uncertainty around Obama's health care law.
If the president is re-elected and the law goes into full effect, employers with lots of low-wage workers may be tempted to drop coverage and send their employees into new state-based insurance exchanges, markets that will offer taxpayer-subsidized private insurance. A separate survey this summer by the Mercer benefits consulting firm found that 9 percent of employers in the retail and hospitality industries say it's likely they will drop coverage, even if they have to pay penalties to the government.
The survey found that workers in lower-wage companies pay $4,977 toward the cost of family coverage, as compared to an average of $4,316 for all workers. And the policy they get for their money is less generous, typically worth about $1,000 less.
“They are really paying more and getting less,” Altman said.
Most experts believe the sluggish economy provides the likeliest explanation for the moderate rise in premiums. Last year's spike was blamed on a mistaken bet by insurers that the economy would recover faster.
The survey includes more than 2,000 small and large employers. Asked what kind of increase they're expecting for 2013, employers said their best estimate at this point is 7 percent — sure to prompt more pain.
The Associated Press and Trib Total Media staff writer Alex Nixon contributed to this report.
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