Benefits and Compensation

Health Premium Increases Slowing, but Deductibles on Rise, KFF Finds

Premiums for employer-sponsored coverage increased at a lower rate this year, but this could be largely ascribed to a growing rate of enrollment in high-deductible plans, according to the Kaiser Family Foundation’s (KFF) annual health benefits survey.

Wellness incentives, spousal surcharges, and employer responses to healthcare reform were among the other topics examined by KFF and the Health Research & Educational Trust in the 2016 Employer Health Benefits Survey released September 14. The 18th annual survey of more than 1,900 small and large employers provides a detailed picture of the status and trends in employer-sponsored health insurance, costs, and coverage.

Annual family premiums rose an average of 3%, continuing a “significant slowdown over the past 15 years,” KFF found. But the trend partially reflects the lower premiums paid for the types of high-deductible health plans (HDHPs) linked to health savings accounts (HSAs) or healthcare reimbursement arrangements (HRAs), which covered 29% of workers in 2016—compared to 20% in 2014.

“We’re seeing premiums rising at historically slow rates, which helps workers and employers alike, but it’s made possible in part by the more rapid rise in the deductibles workers must pay,” KFF President and CEO Drew Altman said in announcing the survey results. The shift from preferred provider organizations (PPOs) to HDHPs effectively reduced the average premium increase by half a percentage point in each of the past 2 years, according to KFF’s analysis.

In 2016, 83% of covered workers face a deductible for single coverage, which averages $1,478—up 12% from 2015, and 49% since 2011, KFF found. Deductibles tended to be much higher at smaller companies (fewer than 200 employees), exceeding $1,000 for 65% of these workers (versus 51% overall).

In many cases, though, employers are reducing the effective deductible with contributions to the HSA of HRA. When these are taken into account, only 38% of employees overall face a deductible of $1,000 or more.

United Benefit Advisors (UAB) found similar trends in its own survey of nearly 20,000 health plans. Even for PPO plans, the median deductible increased from $1,000 to $1,500 in 2016, UBA reported. Total monthly premiums for all plans remained flat, but employers shifted costs to employees in other ways, including median out-of-network deductibles, which jumped from $3,000 to $3,400 this year, and median emergency room copays (up from $250 to $300).

“Overall, employer costs remained consistent because they are passing more and more of their increases on to employees—a trend we expect to see more of in the future,” said Les McPhearson, CEO of UBA, in announcing the results. “Employers simply cannot continue to absorb unsustainable increases in health care costs. Unfortunately, neither can employees.”

Responses to ACA

The KFF study also examined how plan sponsors are adjusting to certain major Affordable Care Act (ACA) requirements. The ACA’s employer mandate took full effect in 2016, and 93% of the affected employers (with 50 or more full-time employees) reported providing coverage that meets the ACA requirements for value and affordability.

KFF did not find widespread efforts to skirt the mandate by reducing workers’ hours below the 30-hour full-time threshold. In fact, more employers reported increasing workers’ hours from part-time to full-time to make them eligible for health benefits (7%) than the other way around (2%).

Regarding the ACA “Cadillac tax” on high-cost plans now scheduled to take effect in 2020, 64% of large employers had analyzed whether any of their health plans would trigger the tax, and of these 27% concluded their largest plan would do so. To avoid this outcome, 15 of large firms reported increasing cost-sharing and nine switched to a lower-cost health plan.

Spousal coverage

In one common form of cost control, employers are taking steps to discourage employees from enrolling their spouses, especially if the spouse has other coverage options:

  • Among employers that offer spousal coverage, 13% of small companies and 5% of larger ones do not allow a worker’s spouse to enroll in coverage if he or she is offered coverage elsewhere. Another 5% of small firms and 8% of large ones only allow enrollment under certain conditions, and 12% require spouses with other coverage options to pay higher premiums or cost-sharing than other spouses.
  • 10% of all employers offering coverage give additional compensation to workers who enroll in their spouse’s health plan instead of the company’s plan.
  • Among firms offering family coverage, 45% of small businesses and 18% of larger ones contribute the same amount toward employees’ premiums whether they enroll their dependents or not—effectively requiring workers to pay the full cost of enrolling the dependents.

Wellness incentives

Employee wellness incentives also remained a popular method of reining in health costs. Most large employers that provide health benefits (59%) offer a health risk assessment that asks workers about their medical history, health status, and lifestyle, KFF found. Of these, 54% offer financial incentives for completing the assessment, including reduced premiums or cost-sharing and eligibility for other wellness benefits, as well as cash, HSA contributions, or merchandise.

The figures were comparable for biometric screenings—53% and 59%, respectively. Of the companies that offer screenings, 14% actually tie incentives to the results, such as attaining a certain body mass index or cholesterol level.

David Slaughter David A. Slaughter, JD, is a Senior Legal Editor for BLR’s Thompson HR products, focusing on benefits compliance. Before coming to BLR, he served as editor of Thompson Information Services’ (TIS) HIPAA guides, along with other writing and editing duties related to TIS’ HR/benefits offerings. Mr. Slaughter received his law degree from the University of Virginia and his B.A. from Dartmouth College. He is an associate member of the Virginia State Bar.

Questions? Comments? Contact David at dslaughter@blr.com for more information on this topic