Posted on 27 Sep 2011
According to a major survey by the Kaiser Family Foundation and the Health Research and Educational Trust, health insurance premiums paid by employers rose sharply this year, with the average annual cost of family coverage passing the $15,000 mark for the first time.
The annual poll performed by the groups showed an 9% average increase in family premiums for 2011, and comes despite a continued trend toward more limited use of medical services in the U.S. Last year, family premiums rose just 3%, the survey found.
The average annual family premium for 2011 was $15,073, up from $13,770 last year. For a single worker, the figure was $5,429, up 8% from $5,049 in 2010. The increase in employees' average premium contribution for a family plan in 2011 was far less: $4,129, up 3% from 2010, according to the survey.
Drew Altman, the chief executive of Kaiser Family Foundation, said the cause of the employers' premium jump wasn't clear. Self-insured employers, which bear the risk of their own coverage, and insurers may have pegged expected rates to "higher utilization and a stronger economic recovery than has turned out to be the case," he said.
Insurers "have been conservative in their pricing, so they have overshot to some degree," said Matthew Borsch, an analyst at Goldman Sachs. "You've seen that reflected in strong earnings they've been reporting." Goldman's blended measure of various employer surveys, insurer disclosures and other indicators showed employer premiums up around 7.8% this year, compared with a 7.1% increase in 2010.
Gary Claxton, a Kaiser Family Foundation vice president, noted that surveys don't always capture exact changes but said the difference between the rates of premium increase in 2011 and 2010 was statistically significant. The survey included 3,184 randomly selected companies, polled between January and May 2011.
The Kaiser survey's researchers estimated that only around 1.5 percentage points of the 9% increase was tied to provisions of the federal health care overhaul, which mandated changes to plans, including the addition of children up to the age of 26 to their parents' plans and an end to out-of-pocket costs for certain preventive-care benefits.
One possible reason for the limited impact is that 56% of covered workers were in plans that had been "grandfathered," or kept largely unchanged so that certain provisions of the federal law wouldn't affect them. Only 23% of employees were enrolled in plans in which the cost-sharing for preventive services changed because of the law.
Karen Ignagni, chief executive of America's Health Insurance Plans, a trade group, said the higher premiums were linked to the increasing cost of medical care, despite the damped demand for health services. "It's the price, the cost, that is driving premiums," she said.
Ms. Ignagni pointed to an S&P index reflecting health care costs covered by insurers, which went up 7.73% in July from a year earlier. In addition, expenses might be higher because of a worker population that is getting older on average, she said.
The increase in premiums came despite a continued trend toward high-deductible plans, which generally cost less because workers bear significant out-of-pocket costs. "You would think that would drag it down," said Carl McDonald, an analyst with Citigroup Investment Research.
In 2011, 17% of workers enrolled in employer coverage were in high-deductible plans paired with a tax-preferred savings option, up from 13% in 2010 and 4% five years ago. Moreover, 31% of employees were enrolled in a plan with a general annual deductible of at least $1,000 for a single person.
The overall share of employers offering health coverage was 60%, which was similar to the share in 2009 but lower than the share in 2010. Dr. Altman said the 2010 result, which included an uptick in the percentage of very small firms offering health coverage, was an "aberrant finding."