Rise in premiums slows as more workers enroll in high-deductible plans

Premiums increased a modest 3 percent over last year as consumers turn to high-deductible plans and health savings accounts to save money, according to an annual survey released by the Kaiser Family Foundation and the American Hospital Association's Health Research & Educational Trust.

The survey found that the average deductible rose 12 percent to $1,478 annually; at small firms the average deductible topped $2,000.

Despite the modest 3 percent increase in 2016, the cost for a family is still more than $18,000 a year, at $18,142, according to the 2016 Employer health Benefits Survey. Workers on average contribute $5,277 annually toward their family premiums.

Premiums for single coverage now average $6,435 annually, of which workers contribute roughly $1,129.

Workers are moving into high-deductible plans compatible with health savings accounts or tied to health reimbursement arrangements that have lower average premiums than other plan types. In 2016, 29 percent of all workers were in such plans, up from 20 percent in 2014.

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A shrinking share of workers, 48 percent in 2016, are enrolled in Preferred Provider Organization plans that have higher-than-average premiums. This is down from 58 percent who were enrolled in PPO plans in 2014.

These shifts effectively reduced the average premium increase by half a percentage point in each of the past two years, the analysis showed. As a result of this trend, average deductibles are continuing to rise.

"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," Kaiser Family Foundation President and CEO Drew Altman said.

Released Wednesday, the 18th annual survey of more than 1,900 small and large employers provides a detailed look at the current state of employer-based coverage and trends in private health insurance.

The ACA's "Cadillac" tax, which could affect relatively high-cost health plans, is scheduled to take effect in 2020. The survey looked at employers' responses to this excise tax on high-cost health plans.

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Nearly two thirds, or 64 percent of large employers offering health benefits say that they conducted an analysis to determine if any of their plans would exceed the Cadillac tax thresholds, and a quarter, 27 percent of this group say their largest plan would do so.

In addition, 15 percent say they have increased their plan's cost-sharing to avoid reaching the excise tax thresholds, and 9 percent say they switched to a lower-cost health plan.

The survey found little evidence that businesses are reducing workers' hours to avoid the Affordable Care Act's requirement to offer coverage in a law which took effect this year. 
The ACA provision requires employers with at least 50 full-time equivalent employees to offer health benefits to full-time workers or pay a penalty.

Seven percent of employers with 50 or more full-time equivalent workers who offer coverage say they shifted, or plan to shift workers' hours from part-time to full-time status to make them eligible for health benefits. Two percent said they shifted or plan to shift workers from full-time to part-time status to make them ineligible.

The survey found 93 percent of firms with at least 50 employees offer health benefits to at least some employees, and the vast majority say their coverage meets the ACA's requirements for value and affordability.

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Less than half of the smallest firms, from three to nine workers, offer coverage and essentially all employers with at least 1,000 workers  do.

The number of employers with 10 to 49 workers who offer coverage has fallen from 74 percent to 66 percent since 2011.

Most large firms offering health benefits offer to give workers a health risk assessment that asks questions about their medical history, health status, and lifestyle. Of those that do, 54 percent offer financial incentives to encourage workers to complete the assessment, such as reduced premiums or cost-sharing; eligibility for other wellness benefits; or cash, contributions to an HSA, or merchandise.

As with health risk assessments, most large firms offering health benefits offer workers biometric screenings, which are health examinations that measure body weight, cholesterol, blood pressure, stress, and nutrition. Most, 59 percent offer financial incentives for undergoing the screenings, and some, 14 percent, tie the incentives to meeting specific outcomes such as a targeted body mass index or cholesterol level.

This year's survey finds that while most employers who provide health benefits offer coverage to workers' spouses, some employers are using a number of strategies that can limit workers and their spouses from enrolling in coverage when other options are available.

For example, among employers that offer spousal coverage, 13 percent of small firms and 5 percent of large ones do not allow a worker's spouse to enroll in coverage if their spouse is offered coverage from another source.

An additional 5 percent of small firms and 8 percent of large ones only allow enrollment under certain conditions.

In addition, 12 percent of firms require spouses with other coverage options to pay higher premiums or cost-sharing.

Ten percent of all offering firms give additional compensation to workers who enroll in their spouse's health plan instead of the company's plan, the survey said. This share is similar for large and small firms.

Among firms offering family coverage, 45 percent of small businesses and 18 percent of larger ones contribute the same dollar amount towards premiums for workers whether they enroll their dependents or not. This in effect requires workers to pay the full costs of enrolling their dependents.

"Particularly for workers at small firms, these limitations and incentives can create challenges for low-income workers to afford health coverage for their families," said study lead author Gary Claxton, a Foundation vice president and director of the Health Care Marketplace Project.

The survey was conducted between January and June of 2016 and included 3,110 randomly selected, non-federal public and private firms with three or more employees, including 1,933 that responded to the full survey and 1,177 others that responded to a single question about offering coverage. 

Twitter: @SusanJMorse