Survey Shows Private Health Insurance Premiums Rose 11.2% in 2004
Survey Shows Private Health Insurance Premiums Rose 11.2% in 2004
Premiums Increased at Five Times the Rate of Growth in Workers' Earnings and Inflation
About Five Million Fewer Workers Covered by Their Own Employer's Health Insurance Since 2001
WASHINGTON, Sept. 9 /PRNewswire/ -- Employer-sponsored health insurance premiums increased an average of 11.2% in 2004 -- less than last year's 13.9% increase, but still the fourth consecutive year of double-digit growth, according to the 2004 Annual Employer Health Benefits Survey released by the Kaiser Family Foundation and Health Research and Educational Trust (HRET). Premiums for employer-sponsored health insurance rose at about five times the rate of inflation (2.3%) and workers' earnings (2.2%).
In 2004, premiums reached an average of $9,950 annually for family coverage ($829 per month) and $3,695 ($308 per month) for single coverage, according to the new survey. Family premiums for PPOs, which cover most workers, rose to $10,217 annually ($851 per month) in 2004, up significantly from $9,317 annually ($776 per month) in 2003. Since 2001, premiums for family coverage have risen 59%.
The survey also found that the percentage of all workers receiving health coverage from their employer in 2004 is 61%, about the same as in 2003 (62%) but down significantly from the recent peak of 65% in 2001. As a consequence, there are at least 5 million fewer jobs providing health insurance in 2004 than 2001. A likely contributing factor is a decline in the percentage of small employers (three to 199 workers) offering health insurance over this period. In 2004, 63% of all small firms offer health benefits to their workers, down from 68% in 2001.
"The cost of family health insurance is rapidly approaching the gross earnings of a full-time minimum wage worker," said Drew Altman, President and CEO of the Kaiser Family Foundation. "If these trends continue, workers and employers will find it increasingly difficult to pay for family health coverage and every year the share of Americans who have employer-sponsored health coverage will fall."
"Since 2001, the cost of health insurance has risen 59 percent. Over that period, employee contributions increased 57 percent for single coverage and 49 percent for family coverage, while workers wages have increased only 12 percent. This is why fewer small employers are offering coverage, and why fewer workers are taking-up coverage," said Jon Gabel, vice president for Health Systems Studies at the Health Research and Educational Trust.
The survey was conducted between January and May of 2004 and included 3,017 randomly selected public and private firms with three or more employees (1,925 of which responded to the full survey and 1,092 of which responded to an additional question about offering coverage). This is the sixth year the joint survey was conducted by Kaiser and HRET, and the 17th year this survey has been conducted overall. Findings appear in the September/October issue of the journal Health Affairs.
Survey highlights include:
-- Worker contributions. This year, workers on average contribute $558 of
the $3,695 annual premium cost of single coverage and $2,661 of the
$9,950 cost of premiums for family coverage. Average employee
contributions for single coverage are statistically unchanged from
2003, while average employee contributions for family coverage grew by
10% -- a similar rate to the average overall premium increase. The
percentage of premiums paid by workers is statistically unchanged over
the last several years, at 16% for single coverage and 28% for family
-- Cost-sharing. Cost sharing rose modestly in 2004 compared to the
larger increases observed in recent years. Most covered workers are in
health plans that require a deductible be met before most plan benefits
are provided. In PPO plans, which cover more than half of all workers
with health benefits, the average deductible for single coverage is
$287 for services from preferred providers and $558 for services from
non-preferred providers, about the same as in 2003. In addition, half
of covered workers must either pay a separate deductible (average $224)
or pay additional co-insurance (averaging 16% of the costs) when they
are admitted to the hospital. The proportion of covered workers facing
a $20 copayment for an office visit increased to 27% in 2004 from 19%
-- Consumer-driven plans. While about 10% of all firms offer a
high-deductible plan to covered workers this year, only about 3.5% of
those firms offer a personal or savings account option along with a
high-deductible plan. These accounts permit employers (and sometimes
employees) to make pre-tax contributions, which can be used by
employees to pay for routine medical care. The survey finds that
employers, particularly larger firms, are interested in high-deductible
plans (a plan with a deductible of at least $1,000 for single
coverage). About 6% of all firms (accounting for 13% of covered
workers) say that they are "very likely" to offer such a plan within
two years, and another 21% of all firms (accounting for 26% of covered
workers) say that they are "somewhat likely" to do so.
-- Type of insurance. In 2004, PPOs continue to be the most common form
of health coverage, with more than half (55%) of all employees with
health coverage enrolling in a PPO. HMOs, which cost significantly
less than PPOs, cover about 25% of covered workers. Conventional, or
indemnity, benefit plans have all but disappeared, covering just 5% of
covered workers. These enrollment shares are statistically unchanged
"You have to look over the past several years to really understand why Americans are so worried about health care costs. Just for premium contributions alone, families are paying $1,000 more this year for their health coverage than they paid in 2000," Dr. Altman said. "More than any other factor, these out-of-pocket cost increases are what's driving voter concern about health."
Facing continued premium increases, many employers say they looked to make cost-saving changes in the past year. Among firms offering coverage, 56% report that they shopped for a new plan in the past year. Of those firms, 31% (17% overall) report changing insurance carriers in the past year and 34% (19% overall) report changing the type of health plan offered.
When asked about future plans, about half (52%) of large firms (200 or more workers) say they are "very likely" to increase employee contributions in the next year. In contrast, just 15% of small firms (3 to 199 workers) say that they are "very likely" to increase employee contributions next year.
Across all firms offering coverage, relatively low percentages say that they are "very likely" in the next year to raise deductibles (9%), raise office visit cost-sharing (5%), raise prescription drug copayments (5%), introduce tiered networks for physicians or hospitals (2%), or restrict eligibility for benefits (1%). In addition, 3% of firms say they are "very likely" to drop health coverage entirely in the near future.
"Employers continue to look for ways to control the rising costs of health insurance, with more than half shopping around for a better option and one in six actually changing insurance carriers," said Gary Claxton, Vice President and the Director of the Health Care Marketplace Project at the Kaiser Family Foundation.
The Kaiser Family Foundation/Health Research and Educational Trust 2004 Annual Employer Health Benefits Survey (Kaiser/HRET) reports findings from a survey of 3,017 randomly selected public and private employers, including 1,925 who responded to the full survey and 1,092 who indicated whether or not they provide health coverage. Kaiser/HRET drew its sample from a Dun & Bradstreet list of the nation's employers with three or more workers. The Kaiser/HRET Employer Benefits Survey is based on previous surveys sponsored by the Health Insurance Association of America from 1987-1990 and KPMG from 1991-1998. Researchers at the Kaiser Family Foundation and the Health Research and Educational Trust designed and analyzed the survey and National Research LLC conducted the field work between January and May 2004. The overall response rate for the survey was 50%. All statistical tests are performed at the 0.05 level except where otherwise noted. Beginning with the 2003 Survey, several methodological changes were made to the survey, including standardizing survey weights to U.S. Census data. Therefore, historical data in the exhibits may differ slightly from previously published estimates.
Individual copies of the survey report and the summary of findings are available on the web at www.kff.org/insurance/7148. Multiple copies of the report may be obtained from HRET by calling 1-800-242-2626 (order #097512). To obtain a copy of the September/October 2004 issue of Health Affairs, contact Jon Gardner at 301-656-7401 or firstname.lastname@example.org. This article is also available on the journal's web site, www.healthaffairs.org.
The Kaiser Family Foundation is a non-profit, private operating foundation dedicated to providing information and analysis on health care issues to policymakers, the media, the health care community, and the general public. The foundation is not associated with Kaiser Permanente or Kaiser Industries.
The Health Research and Educational Trust is a private, not-for-profit organization involved in research, education, and demonstration programs addressing health management and policy issues. Founded in 1944, HRET collaborates with health care, government, academic, business, and community organizations across the United States to conduct research and disseminate findings that help shape the future of health care.