Trends in Employer-Based Health Insurance

1
Trends in Employer-Based Health Insurance

• Jon Gabel
• Senior Fellow, NORC

2
Objectives

• To report on the state of job-based insurance
• To document trends over the past year and past 19
  years
• To examine trends in underlying health care costs
• To assess employers attitudes about offering
  health benefits
• To report about the state of consumer-driven
  health care
• To examine different strategies for controlling
  health care costs

3
KFF/HRET Health Benefits Survey

• Telephone survey of 2,122 randomly selected
  public and private employers
• Interviews with employee benefit managers from
  Jan. 2006 to May 2006.
• Response rate of 48 percent in 2006
• Survey conducted by HIAA 1987-1991 and KPMG
  1991-1998
• Use of statistical weights
• Employer-based statistics
• Employee-based statistics

4
Most Workers and Covered Workers Are Employed by
Large Firms.
5
Increases in Health Insurance Premiums Compared
to Other Indicators, 1988-2006
Source KFF/HRET Survey of Employer-Sponsored
Health Benefits 1999, 2000, 2001, 2002, 2003,
2004 KPMG Survey of Employer-Sponsored Health
Benefits1993, 1996 The Health Insurance
Association of America (HIAA) 1988, 1989, 1990
Bureau of Labor Statistics, Consumer Price Index
(U.S. City Average of Annual Inflation (April to
April), 1988-2003 Bureau of Labor Statistics,
Seasonally Adjusted Data from the Current
Employment Statistics Survey, 1988-2003.
Estimate is statistically different from the
previous year shown at plt0.05 Estimate is
statistically different from the previous year
shown at plt0.1. Note Data on premium increases
reflect the cost of health insurance premiums for
a family of four.
6
Cumulative Changes in Health Insurance Premiums,
Overall Inflation, and Workers Earnings 2000 -
2006
Source KFF/HRET Survey of Employer-Sponsored
Health Benefits, 2001-2006 Bureau of Labor
Statistics, Consumer Price Index, U.S. City
Average of Annual Inflation (April to April),
2001-2006 Bureau of Labor Statistics, Seasonally
Adjusted Data from the Current Employment
Statistics Survey (April to April), 2001-2006.
7
Average Annual Premiums for Covered Workers, by
Plan Type, 2006
4,242
All Plans
11,480
4,049
HMO
11,278
4,385
PPO
11,765
4,168
POS
11,107
3,405
HDHP/SO
9,484

Estimate of total premium is statistically
different from All Plans by coverage type at
plt.05. Note Family coverage is defined as
health coverage for a family of four. Source
Kaiser/HRET Survey of Employer-Sponsored Health
Benefits, 2006.
8
Percentage Increase in Underlying Health Care
Spending, 1991-2006, for All Services
Source Ginsburg, Strunk, Banker, and Cookson
9
Trends in Provider Revenues from Non-Medicare
Patients, 1991 2004, (Annual Percent Change
Per Capita)
10
Health Plan Enrollment for Covered Workers, by
Plan Type, 1988-2006
Distribution is statistically different from
the previous year shown 1996-1998, 1998-1999,
1999-2000, 2000-2001, 2001-2002, 2002-2003,
2003-2004. Source Kaiser/HRET Survey of
Employer-Sponsored Health Benefits 1999, 2000,
2001, 2002, 2003, 2004 KPMG Survey of
Employer-Sponsored Health Benefits
1988, 1993, 1996.
11
Average Monthly Worker Contribution, 1988-2006
Estimate is statistically different from the
previous year shown at plt.05. No statistical
tests were conducted for years prior to
1999. Source Kaiser/HRET Survey of
Employer-Sponsored Health Benefits, 1999-2005
KPMG Survey of Employer-Sponsored Health
Benefits, 1996 Health Insurance Association of
America (HIAA), 1988.
Percentage of Premium Paid by Covered Workers,
1988-2005
Estimate is statistically different from the
previous year show at plt.05. No statistical
tests were conducted for years prior to
1999. Source Kaiser/HRET Survey of
Employer-Sponsored Health Benefits, 1999-2005
KPMG Survey of Employer-Sponsored Health
Benefits, 1996 Health Insurance Association of
America (HIAA), 1988.
12
Average Annual Deductibles for Single Coverage,
by Plan Type, 1999-2006

Estimate is statistically different from the
previous year shown at plt.05. Information was
not obtained for HMO single coverage prior to
2003. Note Average deductibles for PPO and POS
plans are for in-network services. Averages
include covered workers who do not have a
deductible. If covered workers with no
deductible are excluded from the calculation, the
average deductibles for single coverage for 2005
are as follows conventional - 671 HMO - 568
PPO -445 POS - 495. Source Kaiser/HRET
Survey of Employer-Sponsored Health Benefits,
1999-2005.
13
Distribution of Covered Workers by In-Network
Deductible Amounts For Single Coverage, by Plan
Type, 2006






Note Distributions may not add to 100 due to
rounding. Source Kaiser/HRET Survey of
Employer-Sponsored Health Benefits, 2006
14
Among Covered Workers Facing Copayments for
Physician Office Visits, Distribution of
Co-payments, 2004-2006

Distribution is statistically different from
previous year shown at plt.05. Note Copayments
for in-network services in PPO and POS plans were
used to calculate the distribution shown. The
distribution does not include covered workers who
do not face a copayment for office visits (e.g.,
workers who face coinsurance). Source
Kaiser/HRET Survey of Employer-Sponsored Health
Benefits, 2004 - 2005.
15
Among Covered Workers Facing Prescription Drug
Copayment Amounts, Average Copayments, 2000-2006

Estimate is statistically different from the
previous year shown at plt.05. Fourth-tier
copayment information was not obtained prior to
2004. Note Average copayments for generic,
preferred and nonpreferred drugs are calculated
by combining the weighted average copayments for
those types of drugs among firms with a single
copayment amount or a multi-tier cost sharing
structure. The average copayment for fourth-tier
drugs is calculated using information from only
those plans that have a fourth-tier copayment
amount. Source Kaiser/HRET Survey of
Employer-Sponsored Health Benefits 2000-2005.
16
Percentage of Workers Covered by Their Employers
Health Benefits, in Firms Both Offering and Not
Offering Health Benefits, by Firm Size, 1999-2006
Source KFF/HRET Survey of Employer-Sponsored
Health Benefits 1999, 2000, 2001, 2002, 2003,
2004 Year to year estimates are not
significantly different. However, there is a
significant change between 2001 and 2004 for All
Firms and All Small Firms at plt.05. Changes for
All Small Firms are also significantly different
at plt.05 between 2000 and 2004 and between 1999
and 2004.
17
Among Firms Offering Health Benefits, How
Important Are Firms Health Benefits in
Attracting Highly Qualified Employees?
18
All Employers Should Share in the Cost of Health
Insurance for Employees by Either Providing
Health Insurance or Contributing to a Fund to
Cover the Uninsured
19
How Likely Is Your Firm to Drop Coverage
Entirely Next Year?
20
Sample includes 205 firms offering CDHP plans

• 72 HRAs
• 133 HSAs
• Full replacement sample
• 38 CDHP
• 783 PPO
• 178 POS
• 116 HMO
• All CDHP plans are high deductible plans with a
  savings account.

21
The Percentage of Employer-Based Enrollment in
Full Replacement and Option Plans, by Type of Plan
Percent


Source 2006 KFF/HRET Employer Health Benefits
Survey
22
When Offered as a Choice with Other Types of
Health Plans, the Percentage of Employees That
Choose Various Health Plans



Source 2006 KFF/HRET Employer Health Benefits
Survey
23
Satisfaction Rates Are Higher in Traditional
Plans than CDHP or HDHP Plans
Source P. Frostin and S. Collins, Early
Experience with High Deductible and CDHP Plans
Findings from the EBRI/Commonwealth Fund
Consumerism in Health Care Survey, 2005.
24
Premiums Increase More Slowly in CDHP than
Traditional Plans, in Choice Environments, but
not in Full-Replacement Situations



25
Distribution of Firms Opinions on the
Effectiveness of the Following Cost Containment
Strategies, 2006
Tighter Managed Care Networks
Higher Employee Cost Sharing
Consumer-Driven Health Plans
Disease Management Programs
26
How Selected Medical Technologies Affect Spending
and Life Years, 2015 and 2030
Technology 2015 2030 2015 2030 Cost per additional year of Life
Cancer Vaccines 0.5 0.8 0.1 0.4 18,236
Alzheimers Prevention 33.6 49.1 7.4 8.0 80,334
ICDs 14.0 20.7 3.6 3.7 103,395
Diabetes Prevention 13.7 20.6 2.6 2.6 147,195
LVADs 10.2 14.2 2.1 2.3 511,962
Pacemaker for Atrial Fibrillation 10.4 13.6 2.2 2.3 1,403,740

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Strategies for Controlling Health Care Costs

• Government controls on supply, prices, and
  spending
• Change the tax status of employer contributions
  for health insurance from an open-ended deduction
  to a credit
• Promote restrictive managed care through managed
  competition,
• Promote high-deductible plans
• Promote wellness of the U.S. population.
• Provide financial incentives to improve the
  efficiency of health care delivery.
• Evaluate and limit the use of technologies that
  are not cost-effective.
• Foremost, alter the set of perverse incentives
  that rewards inefficient delivery of care,
  purchasing of care, and risk segmentation.
• Can the market work without universal coverage?

28
The Immediate Future
The Slow Decline Continues

• Employer-based insurance is slowly eroding, but
  it is not about to fall over a cliff.
• Premium increases sharply outpace inflation and
  workers earnings in the best of times!
• Underlying costs are stable, but high.
• Most employers both large and small
  nonetheless, seem committed to health benefits.
• Expect HSAs to grow but it is uncertain if CDHP
  will become a niche or mainstream product.
• After five years of expansion, will we see more
  marginal firms offering coverage?