Employers reported only modest hikes in health insurance premiums in 2014, but the trade-off is that more employees see their out-of-pocket costs rising, a new study of employer health benefits by the Kaiser Family Foundation shows.
Premiums rose an average of 2 percent for individual coverage and 3 percent for families. For researchers who have tracked health costs for 16 years, that’s impressively low, given years of much larger increases and speculation that the Affordable Care Act would push costs through the roof.
But higher deductibles – the amount employees must pay before insurance kicks in – are often the path to smaller increases.
Duke Energy, with about 13,000 North Carolina employees, saw participation in high-deductible coverage jump from 30 percent of the workforce in 2013 to just over 60 percent this year. The change came as the company added options, including a second high-deductible plan. The company contributes to a health savings account that covers out-of-pocket costs.
Researchers who track health costs and benefits are just starting to produce data on what happened this year, even as employers are gearing up for 2015 insurance enrollment to start next month. Kaiser, a nonprofit group focused on health policy analysis, surveyed more than 2,000 public and private employers.
The researchers said they know that talk of moderation doesn’t ring true for people like Lisa Rios, who works in sales at Blue Max Materials in Charlotte. Small companies like Blue Max tend to be hit hardest by rising costs.
Going into her firm’s summer enrollment period, Rios faced the prospect of seeing the weekly premium payment for her and her three children go from $135 to almost $200, with a deductible of $7,500. “It just keeps going up and up and up,” she said.
Mike and Donna Bishop, who own the south Charlotte landscape supply company where Rios and about 25 other people work, made a drastic decision: Rather than pass along devastating rate hikes and rising deductibles, they got out of the insurance business. This summer, their staff went to the individual insurance exchange created by the ACA. Many qualified for subsidies, and almost all got a much better deal, Donna Bishop said.
Rios, for instance, said she’s now paying $195 a month to cover herself and her children, with a $1,000 deductible. And Blue Max provides a $300-a-month benefit allowance. “It’s a positive switch,” she said. “I’m just kind of curious how long it’s going to last.”
Experts are watching to see if this becomes a trend. Gary Claxton, a Kaiser vice president who specializes in private insurance, said this year’s survey didn’t show significant numbers of small businesses dropping health insurance, but, “I think if this is going to happen, we’ll watch it unfold over the next couple of years.”
Rooting out causes
Especially during a campaign season, “Obamacare” often gets blamed for all rising health care costs – or credited with every positive trend, depending on who’s spinning.
In fact, benefits are shaped by a mix of federal legislation and market forces that can be hard to tease out.
The ACA does affect what employers offer and what it costs them. The act requires that coverage be offered to children up to age 26 and bans some limits on benefit payouts. Many employers say they’re trying to cut costs now to prepare for a 40 percent excise tax on high-cost “Cadillac plans” that takes effect in 2018.
But when the National Business Group on Health polled 136 large employers in June about the cause of rising costs, the ACA came in well behind high-cost claims, expensive medical conditions, specialty drugs, medical inflation and hospitalization.
The Kaiser study notes that recent cost increases pale in comparison with previous years. From 1999 to 2004, premiums for workplace health insurance rose 72 percent, while average wages rose 17 percent. From 2009 to 2014, premiums rose 26 percent and wages 11 percent.
That’s why Kaiser CEO Drew Altman could describe recent trends as “historic moderation” while acknowledging, “If you say that to an average person, they may look at you like you’re out of your mind.”
Skin in the game
When employers talk about increasing out-of-pocket costs, they cast it as a way to reform the system by making employees smarter consumers. Patients who have their own money on the line are more likely to compare fees and think carefully about what’s really needed, the thinking goes.
High-deductible plans can provide savings over traditional insurance with higher premiums, especially when they’re accompanied by pretax savings accounts with employer contributions. They generally appeal to people without costly chronic conditions, but an unforeseen medical crisis can leave them on the hook for thousands of dollars.
“You have to decide: Does this fit your health profile, as well as your financial position?” said Lew Bowman, spokesman for Blue Cross and Blue Shield of North Carolina.
Major Charlotte-area employers such as Bank of America, Wells Fargo and Duke Energy have added or expanded high-deductible plans in recent years.
In some cases, high-deductible plans are an option. But the Kaiser survey also found that out-of-pocket costs are rising on plans in general, especially at small companies, which have less power to negotiate with insurance companies. The average deductible for all workplace plans has doubled since 2007, the survey found, and is now 85 percent higher at companies with fewer than 200 employees than at larger ones.
Forecasts call for current trends to continue in 2015, with relatively modest premium increases accompanied by more costs being shifted to workers.
But health care remains in flux, and many are watching warily.
Steve Graybill, a partner in Mercer consulting firm’s Charlotte office, noted recent comments by Carolinas HealthCare Systems CEO Michael Tarwater about the impact of state cuts in Medicaid reimbursements and the failure to expand the program to cover low-income adults.
When doctors and hospitals lose money on unpaid care, they have to find ways to offset the losses from paying patients, Graybill said: “If you’re squeezing an economic balloon and you can only get it from one source, that doesn’t bode well.”
Cathy Graham of The Employers Association, a consulting firm that works with Blue Max, said she’s hearing from small companies that are struggling with rising costs. She noted that the Charlotte Eagles, a nonprofit sports ministry with about 20 full-time employees, also decided to stop providing insurance this summer.
Eagles President Pat Stewart said many employees qualified for subsidies on the individual exchange and found themselves better off. Now they’re watching to see what happens with 2015 rates and plans.
“There’s a sense of waiting for the other shoe to drop,” Stewart said. “Initially it’s positive, but the question is whether that can be sustained.”