Health Insurance Premium Growth Dips, But Consumer Costs Rise

A nationwide study has found that healthcare cost-shifting to consumers combined with stagnant household incomes is denying workers an economic benefit from slowing growth in health insurance premiums.

Research released this week is providing a national view of a health insurance trend that has been playing out in local healthcare markets across the country—cost-shifting to consumers.

The rate of premium increases for employer-sponsored health insurance has slowed over the past decade, but deductibles and other forms of cost-sharing are hitting household budgets hard, according to data from nearly 40,000 businesses that was analyzed by the Washington, DC-based Commonwealth Fund.

In a teleconference held Wednesday, Commonwealth Fund President David Blumenthal, MD, said there has been a "recent historic slowdown in healthcare costs" linked in part to cost-cutting requirements of the Patient Protection and Affordable Care Act as well as Medicare initiatives including efforts to reduce unnecessary hospitalizations. "However, workers and their families are not seeing the benefits of these changes."

The research, which features data collected from 31 states and the District of Columbia, covers the period from 2003 to 2013. Key findings include:

• The annual cost of employee contributions to premium costs has doubled over the past decade.
• The pace of premium growth outpaced household income growth in all 31 states and DC.
• Out-of-pocket costs for premiums and deductibles have nearly doubled, rising from 5.3% of median household income in 2003 to 9.6% in 2013.
• Annual growth of premium rates has slowed significantly since passage of the PPACA in 2010. From 2003 to 2010, annual premium increases for workers' health plans were pegged at 5.1%. From 2010 to 2013, the rate of premium growth fell to 4.1%.

Despite the slowdown in premium growth, relatively stagnant growth in household income is resulting in healthcare costs eating a larger share of employees' household budget.

"Healthcare is consuming a greater share of income," Cathy Schoen, lead study author and executive director of the private foundation's council of economic advisers, said during Wednesday's teleconference.

In 2003, there were only two states in the CF report's data set where annual premiums gobbled up 20% or more of household income. In 2013, data shows premiums consumed 20% or more of household income in 18 states.

There has been a marked increase in cost-shifting to consumers, particularly in deductibles. Schoen said about 80% of workers had deductibles built into their health plans in 2013 compared to about 50% of workers in 2003. "High deductibles are the rule now, not the exception."

More High-deductible Offerings
As for healthcare payers, they are trying to ease the cost-shifting burden for individuals and their families, says a spokesman for Pittsburgh-based Highmark Inc. said after the release of the CF report.

"As far as consumers' having more 'skin in the game,' Highmark offers a variety of products with different levels of deductibles. This enables us to provide our members what they need by giving them the power to choose the care, place and price that is right for them," Senior Public Relations Analyst Douglas Braunsdorf says.

"Many of our small group customers continue to want to offer rich benefits to their employees, but they also are offering more high-deductible health plan products as a way to keep premiums lower and shift some of the cost-sharing to their employees."

He says the CF report reflects the findings of research conducted at the Washington, DC-based National Business Group on Health, a nonprofit organization that represents the perspective of large employers on healthcare issues.

"The health insurance industry as a whole is seeing more large groups steering their employees to high-deductible products. In fact, according to a study by the [NBGH], nearly 33% of large employers across the country were expected to offer only high-deductible health plans to their workers for 2015, up from 22% in 2014 and 10% in 2010. And 81% of those large employers were expected to add a high-deductible plan to their menu of choices, up from 53% in 2010," Braunsdorf says.

Employers Also Bear Burden
Brian Marcotte, NBGH's president and CEO, says the PPACA and other reform efforts have lowered overall healthcare spending, "but we have a long way to go."

"While healthcare cost growth has slowed recently, it is still growing faster than the overall economic growth rate. As it does, both employers and employees pay more," Marcotte said Thursday. "While employees have been paying a somewhat greater portion of the costs, employers still pay the bulk and, as costs keep going up, they have been paying more even though the employee share has increased. Employers pay on average 82% of the health insurance premium, which has remained constant since the implementation of ACA."

Employers and their employees have a shared interest in boosting the quality and affordability of healthcare, Marcotte says.

"The cost of healthcare is a challenge that both companies and their employees share and does not benefit either. Employees lose out in foregone pay increases as more of their compensation is in the form of healthcare, and companies have to reduce costs elsewhere or squeeze profits to pay for the increases in their healthcare costs. This is particularly egregious, since we know that a lot of those dollars are for unnecessary, ineffective, or duplicative care, which brings us back to the real problem: the need for radical payment and delivery reform."

Making Consumer Cost-Sharing Work
After Wednesday's teleconference, Schoen said the primary antidotes to burdensome healthcare cost-shifting to patients are informed consumers and better consumer protections.

Highmark's efforts to offer a broad range of health plan choices to consumers is "clearly where the market is moving." Offering a diverse range of health plans as a way to blunt cost-shifting to consumers will only work if individuals and their families have the tools and knowledge to make economically sound decisions, she said.

Schoen noted for example, that HealthCare.gov, has improved its cost estimator for individual coverage. "It's gotten more standardized, so it's easier to compare."
 
And consumer protections established under the PPACA are taking some of the sting out of cost-sharing, she says. "At least there is a floor under what has been covered," Schoen said. "It is no longer legal for health plans to put a ceiling on the cost of care."