Every year, the Kaiser Family Foundation and the Health Research & Educational Trust produce the leading survey of employee health benefits. Yesterday, KFF and HRET issued their survey of health benefits in 2010 with a news release that begins:
Family Health Premiums Rise 3 Percent to $13,770 in 2010…
Premiums rose by just 3 percent? Great news! Last year, KFF/HRET guesstimated that the average cost of family coverage could hit $14,539 in 2010. Working families saved hundreds of dollars!
Not so fast, says KFF/HRET. The main reason premiums rose less than expected is that “businesses have been shifting more of the costs of health insurance to workers through … deductibles and other cost-sharing,” said KFF president and CEO Drew Altman. Actually, deductibles and other cost-sharing do not shift health insurance costs; they reduce the amount of insurance. What they shift is the cost of health care, from the insurance pool to individual members of the pool.
Nevertheless, greater cost-sharing does appear to be a significant factor behind the minimal growth in premiums:
Many employers are … raising the annual deductibles workers must pay before their health plans begin to share most health care costs. A total of 27 percent of covered workers now face annual deductibles of at least $1,000, up from 22 percent in 2009, the survey finds. Among small firms (3-199 workers), 46 percent face such deductibles…
Among other plan types, only consumer-driven plans (which are high-deductible plans that also include a tax-preferred savings options such as a Health Savings Account or Health Reimbursement Arrangement) saw growth in their market share. Such plans now enroll 13 percent of covered workers, up from 8 percent last year…
“Consumer-driven plans have clearly established a foothold in the employer market, tripling their market share from 4 percent in 2006 to 13 percent today,” said study lead author Gary Claxton, a Kaiser vice president and director of the Healthcare Marketplace Project.
“This may be helping to stem the rapid rise in premiums that we saw in the early 2000s, but it also means employer coverage is less comprehensive,” says Altman.
Yes, and that’s generally good news too. Federal tax law encourages workers to increase their consumption of employer-sponsored insurance at the expense of other stuff they value more. In a 2004 study for the Cato Institute, Christopher Conover estimated the tax preference for employer-sponsored insurance leaves Americans more than $100 billion worse off each year. That same tax preference also fuels the “relentless” rise in health insurance premiums. The trend toward greater cost-sharing shows that private markets are responding to rising prices the way they should: by limiting consumption of low-value items.
Maulik Joshi, who is “president of HRET and senior vice president for research at the American Hospital Association,” worries, “High out-of-pocket expenses … affect health care decisions for patients… [H]ouseholds will face difficult choices, like forgoing needed care, or reexamining how they can best care for their families.” Exactly. Someone needs to choose between health care and other uses of money. Avoiding those difficult choices is not an option. The best available evidence suggests that consumers do a remarkably good job with those decisions. The only lamentable part is that employers are deciding how to make health insurance less comprehensive (greater cost-sharing vs. managed-care controls), instead of workers making those decisions for themselves.
But isn’t this generally good news? Apparently not to the folks at KFF and HRET. In a subsequent post, I’ll explore the negative spin they put on what their survey found.