Health Insurance Costs Rise Steeper In 2011
September 28, 2011

Health Insurance Costs Rise Steeper In 2011

The cost of employer-sponsored health insurance soared this year, rising more sharply than in previous years, according to a report released Monday by the Kaiser Family Foundation, a nonprofit research group that tracks employer-sponsored health insurance.

After several years of relatively modest increases, annual premiums for family coverage rose 9 percent this year, surpassing $15,000 for the first time, while premiums for single coverage jumped 8 percent compared to 2010, according to the report.

The figures “substantially” outpace any growth in workers´ wages, Kaiser said.

“The 9 percent growth rate in family premiums for 2011 is significantly higher than the 3 percent growth rate in 2010,” for family coverage, Kaiser said.  Rates for single coverage rose 5 percent in 2010.

“The open question is whether that´s a one-time spike or the start of a period of higher increases,” Kaiser Foundation CEO Drew Altman told The New York Times. 

The sharp rise in health insurance premiums comes at a time when the economy is still stammering with an official unemployment rate of more than 9 percent.

Many businesses cite the high cost of health insurance as a contributing factor in their decision not to hire, the Times reported.

Altman told the Washington Post that a number of factors could have contributed to this year´s steep rise in premiums, such as rising health care costs, insurer profits and President Obama´s health care overhaul.

The overhaul, known as the Affordable Care Act, became law in March of last year.  

Kaiser said initial provisions of the law contributed between 1 and 2 percentage points to this year´s premium hikes, the Washington Post reported.

Companies and workers split premiums for employer-sponsored coverage, with employers typically paying 70 percent or more of the costs, Kaiser reported.

Businesses likely reacted to these cost increases by giving smaller raises or no wage increases to their workers, said Helen Darling, CEO of the nonprofit National Business Group on Health, during an interview with the Washington Post.

“(Workers) basically are giving their pay raise to the health system,” she said.

“It´s really bad news.”

However, next year´s report may indicate a reversal of this trend.  Insurers have been saying for months that health care use is growing more slowly this year, something industry insiders attribute to the slow economy.

Altman and other experts say that could lead to lower increases in health insurance premiums increases next year, since insurers partially base their rates on how often people seek healthcare.

The Kaiser study also found that 31 percent of covered workers are in high-deductible health plans, facing deductibles for single coverage of at least $1,000, including 12 percent facing deductibles of at least $2,000. 

Covered workers in smaller companies of 3-199 workers are more likely to face such high deductibles, with half of workers in smaller firms facing deductibles of at least $1,000, including 28 percent facing deductibles of $2,000 or more, Kaiser said.

These numbers reflect, in part, the rise of consumer-driven plans, which are high-deductible plans that include a tax-preferred savings options such as a Health Savings Account or Health Reimbursement Arrangement. 

Over the past two years, a growing number of employers have begun offering these plans, with the share of covered workers enrolled doubling from 8 percent in 2009 to 17 percent in 2011, Kaiser said.

Plans that can be used with a Health Savings Account typically have lower premiums than other plans, but must have annual deductibles of at least $1,200 for an individual and $2,400 for a family.

Altman said he expects this trend to continue growing as employers seek to control premiums.

“This is the main tool that employers have in the toolbox right now, so we´re going to see more and more high-deductible plans with bigger and bigger deductibles,” he said.

Other findings from the study include:

- Worker-only coverage - Premiums for worker-only health coverage increased 8 percent in 2011, to $5,429 annually.  Workers pay $921 toward this coverage, on average

- Offer rate - The share of employers offering health insurance to their workers is 60 percent this year, comparable to recent previous years. 

- Cost-sharing for office visits and drugs - Covered workers facing copayments for in-network physician office visits on average pay $22 for primary care and $32 for specialty care.  For covered workers with three- and four-tier drug plans, average copayments are $10 for generic drugs, $29 for preferred brand-name drugs, $49 for non-preferred brand-name drugs, and $91 for specialty drugs.

- Retiree health benefits - Among large firms with 200 or more workers, 26 percent offer retiree health benefits in 2011, unchanged from last year and down significantly from 32 percent in 2007.


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