Thursday, September 17, 2009

Understanding Employer Health Benefits

According to the benchmark 2009 Employer Health Benefits Survey released by the Kaiser Family Foundation and the Health Research & Educational Trust premiums for employer-sponsored health insurance rose to $13,375 annually for family coverage this year - with employees on average paying $3,515 and employers paying $9,860. The survey also found that 21 percent of about 3,200 companies surveyed nationwide reduced benefits or increased cost sharing this year because of the economy, and 15 percent raised workers' share of premiums.

This trend reinforced findings from another large survey of employers that Mercer LLC released. It found that 63% of employers will ask their employees to bear a greater share of expenses next year and 18% plan to eliminate more generous plans.

Family premiums rose about 5 percent this year, which is much more than general inflation (which fell 0.7 percent during the same period, mostly due to falling energy prices). Workers wages went up 3.1 percent during the same period. Since 1999, premiums have gone up a total of 131 percent, far more rapidly than workers' wages (up 38 percent since 1999) or inflation (up 28 percent since 1999). For the past few years, the annual rise in premiums has been more moderate than the double-digit growth experienced earlier this decade.

Although 2009 is another year of moderate premium growth for family coverage, cost sharing continues to increase as more workers face deductibles of $1,000 or more and higher office-visit copayments. Despite the economic downturn, the percentage of firms offering health benefits and the percentage of workers covered by insurance offered by their employer remains steady, including the offer and enrollment rates for high-deductible plans with a savings option, which may indicate a strong commitment by employers to maintaining workers' benefits. It may also reflect the possibility that some employers made decisions about health benefits before the implications of the worsening economy were fully apparent. In addition, the survey collects information only from firms that are still in business and does not estimate the number of workers who no longer have coverage as a result of firm closures or downsizing. However, some firms surveyed reported reducing the scope of benefits offered, increasing cost sharing, or increasing the amount workers have to pay for coverage, in response to the economic downturn.

You can read the full Kaiser Family Foundation survey plus analysis below...

Analysis of the data:

The cost of coverage - The average annual cost of health coverage in 2009 is $4,824 for single coverage and $13,375 for family coverage. The average family premium is about 5 percent higher in 2009 than in 2008 ($12,680).4 During this same period, general inflation fell by 0.7 percent, and wages rose by 3.1 percent. The change in the average cost of single coverage between 2008 ($4,704) and 2009 ($4,824) is not statistically significant; this is a notable change from past years.

Small firms (3-199 workers) have lower average premiums for family coverage than large firms (200 or more workers). Single and family premiums remain higher in the Northeast than in other regions. By plan type, premiums for covered workers in high-deductible plans with savings option are lower than the overall average premium levels for both single and family coverage.

Employee premium contributions - Covered workers on average contribute 17 percent of the premium for single coverage and 27 percent of the premium for family coverage; this amount has changed little in recent years. Workers in firms with a higher proportion of lower-wage workers (in which 35 percent or more of workers earn $23,000 or less per year) on average contribute a larger share of the premium than workers in firms with a lower proportion of lower-wage workers for single coverage (20 percent versus 16 percent) and family coverage (35 percent versus 26 percent; data not shown). Workers in firms with some union workers on average contribute a lower percentage toward family coverage than workers in firms without union members (21 percent versus 30 percent; data not shown).

The average annual amounts contributed by covered workers are $779 for single coverage and $3,515 for family coverage. These levels are similar to levels in 2008. Employee contributions for single coverage are higher ($946) in the Northeast and lower ($667) in the West. Employee contributions for family coverage are lower in the Midwest ($3,174) than in other regions.

Workers' contributions continue to vary by firm size. Employees in small firms contribute significantly less than employees from large firms for single coverage. The opposite is true for family coverage, for which employees in small firms contribute more than $1,000 more, on average, than employees from large firms. Employees' contributions for single coverage may be lower for small firms in an effort to encourage enrollment to meet minimum enrollment levels.

Plan enrollment and cost sharing - The amount and type of cost sharing workers have is largely dependent on the type of plan in which they are enrolled. PPOs retain the largest market share, followed by HMOs, POS plans, HDHP/SOs, and conventional plans. Market shares did not change significantly from their levels in 2008.

General annual deductibles - A general annual deductible is the amount an enrollee must pay before all or most services are covered by the health plan. Although the percentage of workers with such a deductible did not change for any plan type from 2008 to 2009, the percentage of workers with a deductible of $1,000 or more for single coverage increased from 18 percent in 2008 to 22 percent in 2009. Although only 16 percent of workers in HMOs have a deductible, the average deductible increased from $503 in 2008 to $699 in 2009 for single coverage and from $1,053 in 2008 to $1,524 in 2009 for aggregate deductibles for family coverage. As we have seen in previous years, for most plan types, covered workers in small firms (3-199 workers) have higher average deductibles than workers in larger firms. For PPOs, the most common plan type, the average deductible for workers with single coverage in small firms is $1,040, compared to $478 for workers in large firms.

Physician office visit cost sharing - In addition to any general deductible a plan may have, 77 percent of covered workers are required to pay a copayment (a fixed-dollar amount) for a physician office visit, while 14 percent pay coinsurance (a percentage of the charges). From 2008 to 2009, there were statistically significant increases in the average copayments for a visit with a physician: from $19 to $20 for a visit with a primary care physician and from $26 to $28 for a visit with a specialist. The average coinsurance amount for physician office visits is 18 percent. The type of cost sharing varies by plan type: copayments are the most common form of office visit cost sharing for covered workers in HMOs, PPOs, and POS plans. However, workers in high-deductible plans with savings option are more likely to have coinsurance (44 percent) or no cost sharing (39 percent) than to have copayments (14 percent) once the deductible has been met.

Inpatient and outpatient cost sharing - More than three in four covered workers face cost sharing for the following services: 78 percent have cost sharing when admitted to a hospital and 76 percent, for outpatient surgery (data not shown). The form of cost sharing varies by plan type. For both types of services, covered workers in HMOs are more likely to face a copayment, whereas workers in PPOs or high-deductible plans with a savings option are more likely to have coinsurance. For example, for hospital admissions, 65 percent of workers in PPOs have coinsurance and 12 percent have copayments, compared to 44 percent of covered workers in HMOs with copayments and 14 percent with coinsurance. For workers in PPOs, the average hospital coinsurance rate is 18 percent, and for workers in HMOs, the average hospital copayment is $247.

Prescription drug cost sharing - More than three-fourths of covered workers are in plans with three or more tiers of cost sharing for prescription drugs. The first tier is typically generic drugs; tier 2 is typically preferred brand-name drugs; tier 3 is typically nonpreferred brand-name drugs; and tier 4 is typically specialty medications. As noted in previous years, co-payments are most prevalent for the first three tiers, and the prevalence of copayments or co-insurance is similar for workers with a fourth tier of cost sharing. The average copayments for those with three- or four-tier cost sharing are $10 for first-tier drugs, $27 for second-tier drugs, and $46 for third-tier drugs. For covered workers with a fourth tier, the average tier 4 copayment is $85, and the average coinsurance amount is 31 percent.


High-deductible health plans with savings option - There has been little movement since 2008 in the percentages of employers offering high-deductible plans with savings option or enrollment in this plan type. These high-deductible plans (at least $1,000 for single coverage and $2,000 for family coverage) (1) are offered with a health reimbursement arrangement (HRA), referred to as HDHP/HRAs, or (2) meet the federal requirements allowing an employee to contribute to a health savings account (HSA), referred to as HSA-qualified HDHPs. Twelve percent of employers offering health benefits offer high-deductible plans with a savings option in 2009--statistically similar to the 13 percent reported in 2008 and the 10 percent reported in 2007.

Larger firms remain the most likely to offer high-deductible plans with savings option: 28 percent of firms with 1,000 or more employees do so (up from 22 percent in 2008), compared to 12 percent of firms with 3-999 workers. As discussed above, 8 percent of covered workers are enrolled in these plans--the same percentage as in 2008. Despite large firms' increased likelihood of offering such plans, a larger percentage of workers in firms with 3-199 workers are enrolled in them (13 percent) than workers in firms with 200 or more workers (6 percent; data not shown).

The graphic below shows the average premiums, worker premium contributions, HRA or HSA contributions by employers, and deductible amounts for covered workers in HDHP/HRAs and HSA-qualified HDHPs. The average premiums for single and family coverage in both types of high-deductible plans are lower than overall average premiums for all plan types. The average worker contributions to premiums for single and family coverage in HSA-qualified HDHPs are lower than the average worker contribution for all plans. However, the average worker contribution for single and family coverage in HDHP/HRAs is not statistically different from comparable estimates for all plans.

In addition to contributing to the premiums, employers offering high-deductible plans with savings option may also contribute to the savings account. Annual employer contributions to HRAs average $1,052 for employees with single coverage and $2,073 for employees with family coverage. For HSAs, the average HSA employer contribution amounts are $688 for single coverage and $1,126 for family coverage. Neither HRA nor HSA contributions are statistically different from the 2008 averages for single coverage (HRA: $1,249, HSA: $838) or family coverage (HRA: $2,073, HSA: $1,522). Covered workers in small firms (3-199 workers) receive higher HSA contributions from employers than workers in large firms (200 or more workers) for single coverage ($868 versus $450) and family coverage ($1,364 versus $815; data not shown). Twenty-nine percent of employers offering HSA-qualified HDHPs (covering 31 percent of workers enrolled in these plans) do not make contributions to HSAs established by their workers. When employees work for a firm that contributes to the HSA, the average annual contribution is $1,000 for single coverage and $1,640 for family coverage.

Single and family deductibles associated with HDHP/HRAs and HSA-qualified HDHPs for 2009 are similar to the 2008 amounts. For single coverage, workers in HDHP/HRAs have an average deductible of $1,690, and workers in HSA-qualified HDHPs have an average deductible of $1,922. The average aggregate family deductible is $3,422 for HDHP/HRAs and $3,734 for HSA-qualified HDHPs.

Employers' Health Plan Practices

Health risk assessments - The survey also asked firms whether they give their employees the opportunity to complete a health risk assessment, which typically includes questions about medical history, health status, and lifestyle choices and can help identify potential health problems and target wellness or disease management interventions. Among firms offering health benefits, 16 percent give their employees the option to complete such an assessment: 55 percent of large firms and 14 percent of small firms provide this option. Of firms offering health risk assessments, 11 percent offer financial incentives to employees who complete the assessment; large firms are much more likely than small firms to do so.

For the first time, the survey in 2009 included questions on the specific financial incentives offered to employees who complete a health risk assessment. Some large firms offering financial incentives provide the following incentives for employees: a smaller share of the premium (27 percent), a smaller deductible (7 percent), and a lower coinsurance rate (2 percent).

Health risk assessments may also be used to encourage employees to participate in well-ness programs. About 38 percent of firms reported that they do so, with 33 percent of small firms and 61 percent of large firms using health risk assessments for this purpose. Looking at when employees take risk assessments, 19 percent of firms require employees to do so during open enrollment, and 13 percent require that the assessment be taken during another specified time frame; the remaining two-thirds of firms reported that there is no specified time frame.

Wellness programs - The majority of employers offering health benefits (58 percent)offer at least one of the following wellness programs in 2009: weight-loss programs, gym membership discounts or on-site exercise facilities, smoking cessation programs, personal health coaching, classes in nutrition or healthy living, Web-based resources for healthy living, or a wellness newsletter. The percentage of large firms offering wellness benefits rose from 88 percent in 2008 to 93 percent in 2009, while there was no statistically significant increase among small firms (53 percent to 57 percent; data not shown).

Among firms offering health benefits, relatively few firms offering wellness benefits offer employees incentives to participate: 4 percent reduce the premium share the worker must pay; 1 percent lower the worker's deductible; and 10 percent offer gift cards, travel, merchandise, or cash. Among firms that offer a high-deductible plan with savings option, 1 percent offer workers who participate in wellness programs higher HSA or HRA contributions.

On-site health clinics - For the first time, the survey also asked whether the largest firms have an on-site health clinic for workers at any of their major locations. Among firms with 1,000 or more employees, 20 percent have such a clinic, defined as one at a workplace staffed by health professionals such as nurses or doctors where employees can receive health care for either work-related or other illnesses. Seventy-nine percent of firms with workplace clinics report that employees may receive treatment for non-work-related illnesses at the on-site clinic.

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