Employer Health Deductibles Have Grown, Study Finds

Employer insurance premiums grew by only 3 percent to $18,142 annually for families in 2016, but deductibles are increasing at a greater rate, according to a Kaiser Family Foundation report released Wednesday.

These numbers fit the health insurance market trends of the past five years. While premium growth has remained at around 3 or 4 percent each year, the percentage of workers whose employer-provided plans have an annual deductible has grown from 74 percent to 83 percent. The average single deductible has grown as well, from $991 to $1,478.

“From my perspective, what we’re really seeing this year, but we’ve really seen it develop gradually, is a shift from comprehensive to more skimpy coverage,” said Drew Altman, president and CEO of Kaiser. Altman said the shift to more cost sharing is “both good and bad.”

“I think it’s the biggest change in health care in America that we are not debating. It may be even bigger than the ACA in terms of number of people affected,” he added.

Employer insurance certainly is used by more people than individual insurance, which is generally purchased under Obamacare. According to Census Bureau, 55.7 percent of the population had employer-based insurance in 2015, compared with 16.3 percent who had individual insurance. Public polling also has consistently shown health care affordability concerns as a top voter priority.

The study found that the average single premium for employer-provided insurance in 2016 is $6,435, to which workers contribute an average of $1,129. Workers on average contribute $5,277 annually to their family premium.

Premium growth in the employer market is far lower than the growth in the individual market. Insurers on the ACA exchanges have requested double-digit rate increases for 2017 across the country. Insurers say this is a result of sicker than expected enrollees, the abuse of special enrollment periods, and the end of two Obamacare programs designed to reduce risk.

Experts say the rate volatility on the individual market is in part a result of insurers setting premiums too low in 2014, the first year the exchange operated. By contrast, the employer market has been around for decades and is more stable.

“In those two cases, what the premium changes are measuring are pretty different things. The premiums in the employer market – it’s a stable market, and they’re related to the changes in health care costs,” said Gary Claxton, a vice president at Kaiser.

On the individual market, high premium increases are “primarily about getting the prices right from prior prices, which were not correct,” Claxton said.

In a statement by Council of Economic Advisors Chairman Jason Furman and Chief Economist Matt Fiedler, the White House touted the low premium growth in employer insurance as partially attributable to the Affordable Care Act.

The average premium for a family with employer coverage is nearly $3,600 lower over the past six years than if premiums had continued growing at the same rate as they did in the decade before Obamacare passed, the White House said.

“These data are the latest evidence that per-enrollee health care spending growth has remained low in both the public and private sectors so far in 2016, bolstering the case that much of recent years’ slow growth in health care costs reflects enduring structural changes in the health care system, including reforms introduced by the Affordable Care Act,” they wrote.

But low premium growth may be partially attributed to the growth in deductibles, Altman said. For the first time, the survey found more than half of covered workers face deductibles of at least $1,000 annually for single coverage. This is slightly effectively offset in firms that contribute to employees’ health savings accounts or health reimbursement accounts. Employees can use those funds to meet their deductibles, and when these employer contributions are factored in, the percentage of employees with a deductible over $1,000 falls to 38 percent.

The Kaiser survey concluded that Obamacare implementation does not appear to be causing major disruptions in the employer market. The law’s employer mandate was fully implemented in 2016, and almost all employers with more than 50 workers said they offer ACA-compliant coverage to full-time employees.

Fears that Obamacare would cause employers to shift workers from full-time to part-time schedules have not been realized, the survey found. Only 2 percent of employers with more than 50 employees said they have reduced hours to avoid offering health benefits to workers, while 7 percent said they have moved employees from part-time to full-time so they could be eligible for health benefits.

The survey also looked at how employers are responding to Obamacare’s Cadillac tax, a 40 percent excise tax on employer-sponsored health benefits above a certain threshold. The tax is opposed by some lawmakers on both parties, and a lobbying coalition formed last year to advocate against it. At the end of last year, Congress pushed its implementation date back two years to 2020.

The Kaiser survey found that 64 percent of large employers have conducted an analysis to determine how the tax would impact them, and 27 percent of those employers found their largest plan would exceed the tax threshold. A smaller proportion (15 percent) have increased their plan’s cost sharing to avoid triggering the tax, while 9 percent said they switched to a lower-cost plan.