Health Insurance Premiums Rise 6.1 Percent in 2007

Premiums for employer-sponsored health insurance rose an average of 6.1 percent in 2007, less than the 7.7 percent increase reported last year but still higher than the increase in workers' wages (3.7 percent) or the overall inflation rate (2.6 percent), according to the 2007 Employer Health Benefits Survey released by the Kaiser Family Foundation and Health Research and Educational Trust. Key findings from the survey were also published in the journal Health Affairs.

The 6.1 percent average increase this year was the slowest rate of premium growth since 1999, when premiums rose 5.3 percent. Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation has gone up 17 percent. The average premium for family coverage in 2007 is $12,106, and workers on average now pay $3,281 out of their paychecks to cover their share of the cost of a family policy.

In spite of the extensive attention paid to consumer-driven health plans, the survey finds that these relatively new types of arrangements have made only a small inroad into the employer market. Such plans cover about 5 percent of all covered workers, which is not statistically different from the 4 percent share recorded in 2006.

Overall, an estimated 3.8 million workers are enrolled in consumer-driven plans, about equally divided between high-deductible plans that qualify for a Health Saving Account (HSA) and plans with a Health Reimbursement Arrangement (HRA). These plans feature a high-deductible plan and a tax-preferred savings option, from which employees can pay for their out-of-pocket medical expenses. Such plans are often described as consumer-driven because people pay directly for a greater share of their health care and may have an incentive to minimize its cost. They also may offer tools to help consumers choose providers based on cost and quality.

This year, 10 percent of firms offered a consumer-driven plan to their workers, which is up from (but not statistically different than) the 7 percent of firms reporting this for 2006. Firms with at least 1,000 workers are more likely to offer such plans, with nearly one in five (18 percent) offering one. Looking toward 2008, few firms that don’t already offer such plans report that they are very likely to add a HRA plan (3 percent) or a HSA-qualified plan (2 percent).

Premiums for these high-deductible plans are generally lower than for other types of plans, though in addition to the premiums, employers may also contribute money to the savings accounts. The survey finds that firms on average pay a total of $7,815 toward the cost of family coverage for a HSA-qualified plan (including $714 for the account) and $10,179 toward the cost of family coverage for a high-deductible plan with a HRA (including $1,800 for the account). Compared to the $8,879 average firm contributions for other types of plans, employer contributions are lower for HSA-qualified plans and higher for plans with HRAs.

Businesses made no contribution at all to the savings account for roughly half of all workers enrolled in an HSA for family coverage, leaving workers to pay the generally higher out-of-pocket costs associated with their high-deductible plan. Many employers surveyed indicate that they expect to make significant changes to their health plans and benefits in 2008. Overall, 21 percent of firms say they are "very likely" to raise workers' premium contribution next year. Some firms also say they are "very likely" to increase office visit cost-sharing (13 percent), increase deductibles (12 percent), and increase prescription drug cost-sharing (11 percent). On the plus side, very few firms say they are "very likely" to restrict eligibility for coverage or drop health coverage altogether.

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