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Deductibles Rise in Employer-Sponsored Health Plans

By Andrew Siddons, CQ Roll Call

September 14, 2016 -- Health insurance deductibles rose by 12 percent in employer-sponsored insurance, according to a new analysis by the Kaiser Family Foundation. The dramatic increases occurred as a growing number of American workers shifted to plans with lower premiums but higher out-of-pocket costs.

Health insurance premiums for people covered by their employers rose in 2016 at a similar pace to 2015 but still more slowly than in previous years.

In 2016, 29 percent of workers used plans with relatively high deductibles, compared to 20 percent in 2014. Average annual deductibles rose $159 to $1,478 in 2016. Those deductibles can widely vary based on the size of the workplace: They were on average $1,238 per year at large firms with more than 200 employees, versus $2,069 at smaller firms. Higher-deductible plans on average cost $5,762 for individuals and $16,737 for families.

Drew Altman, president of the Kaiser Family Foundation, said the shift from comprehensive plans to plans with high deductibles but lower premiums is "the biggest change in healthcare in America that we are not really debating." In a briefing with reporters on Wednesday, Altman called the shift "both good and bad."

And while the survey showed that more employers are investing in prevention and wellness programs designed to help employees manage their own healthcare costs, "there are real questions we can discuss around their effectiveness," Altman said.

The data paint a rosier picture for individuals with employer-sponsored coverage, who saw much less of a year-over-year impact on their pocketbooks than their counterparts purchasing coverage on the insurance exchanges established by the 2010 health overhaul (PL 111-148, PL 111-152). Those individuals saw their premiums increase by a national average of about 12 percent, though the impact was mitigated by consumers shopping around and by premium tax credits available for lower-income consumers.

The affordability of health insurance both on and off the exchanges remains a major priority for the Obama administration, which is fielding widespread criticisms from Republicans about future premium increases on the individual market that may be twice as high as last year's.

While the premium increases for employers were modest, premiums are still increasing more quickly than wages and economic growth, noted Steve Wojcik, vice president of public policy at the National Business Group on Health, a nonprofit that represents large employers' perspective on healthcare issues.

"Relief for employers and employees from these cost increases must increasingly come from stepped up efforts to pay smarter for health care, to combat excessive consolidation of hospitals and health care providers, and to eliminate perverse incentives that encourage physicians to provide unnecessary care and choose more expensive care," Wojcik said in an e-mail.

The cost of premiums in plans that include employees and their families increased by 3 percent in 2016, to $18,142, an increase similar to the year before, according to the Kaiser survey. The premium for covered individuals was $6,435, which did not represent a statistically significant increase over the year before. Workers themselves on average contributed 18 percent of those premium costs for individual plans and 30 percent for family coverage. Over the five-year period from 2011 to 2016, those premiums increased 20 percent. That was slower than a 31 percent increase from 2006 to 2011 and a 63 percent increases between 2001 and 2006.

Workplace size had an impact on several factors. Workers at smaller firms paid a larger share of the total premium (36 percent) compared to workers at large firms (26 percent). Workers at smaller firms are also more likely to pay a larger share of the cost if they have coverage for their families. At the very smallest firms, with only 3 to 9 employees, only 46 percent of employers offered any coverage at all.

Under the 2010 healthcare overhaul (PL 111-148, PL 111-152), employers with at least 50 full-time employees were required to offer health benefits. The number of employers offering coverage to their employees in 2016 was 56 percent, similar to the 57 percent covered the year before. This means that 89 percent of workers are employed somewhere that offers health benefits.

While there has been concern that the employer mandate could result in employees being shifted from full-time to part-time, where they wouldn’t be eligible for coverage, only 2 percent of firms surveyed said they plan to change job classifications in this manner. On the contrary, 7 percent said they planned to move part-time employees to full-time positions so they would be eligible for coverage.

The White House on Wednesday pointed to the Kaiser survey as proof that the administration’s healthcare policies have been working as intended. Jason Furman and Matt Fielder of the Council of Economic Advisers said in a blog post that deductibles were rising at a predictable rate and that they were not related to premium increases slowing. They instead argued that other structural changes were responsible for the lower premium growth.

"While trends in deductibles receive the most attention, families’ overall out-of-pocket spending burdens also depend on other features of their coverage, including what services are covered before the deductible, the size of their co-payment and co-insurance obligations, and whether they have a limit on their annual out-of-pocket costs," they wrote.

The analysis, from the Kaiser Family Foundation and Health Research & Educational Trust, was based on a survey of 1,900 small and large employers.

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