TOPICS > Health

What’s Behind 9% Jump in Employer-Paid Health Insurance Premiums?

September 27, 2011 at 12:00 AM EDT
A survey released Tuesday by The Kaiser Family Foundation reported that annual health insurance premiums for a family of four climbed $15,000 this year. Judy Woodruff discusses what's causing health insurance costs to rise with Susan Dentzer of Health Affairs.
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JUDY WOODRUFF: And to the rising cost of health insurance, which appears to be surging once again.

A new survey of businesses found that annual premiums for a family of four climbed to $15,000 this year. The Kaiser Family Foundation, which releases the annual survey of employer-paid insurance, reported an increase of 9 percent, up from 3 percent last year. The report also documented a dramatic decade-long rise for both employers and employees.

Annual employee contributions now total more $4,100 on average. That’s more than 130 percent higher than back in 2000. The survey also found that, to cut costs, more employers are enrolling in high-deductible policies that cut annual premiums, but require employees to pay more out of pocket for medical care.

And here to tell us more about all this is Susan Dentzer. She’s the editor-in-chief of the journal Health Affairs and an analyst for the NewsHour.

Susan, it’s good to see you with — and have you with us again.

SUSAN DENTZER: Great to be here, Judy.

JUDY WOODRUFF: So, let’s start with a clarification. We’re saying that the premiums that employers pay went up 9 percent in the last year. Does that mean that employees are paying that much more?

SUSAN DENTZER: Well, actually, what went up was the total cost of an employer’s health coverage package for an employee. So all of that went up 9 percent.

We know that, as you said, on average, many employees will be paying only about $4,000 or so toward that $15,000 cost in effect of the coverage package. For about 50 percent of American workers who have employer coverage, they are paying 50 percent of the amount of the coverage. So — and actually what we see in the most recent year is that employers were picking up more of that cost increase than employees in this particular year.

That’s not always the case, but it was the case this year.

JUDY WOODRUFF: So what’s behind the increase?

SUSAN DENTZER: Well, there are lots of things that go into the steaming cauldron of higher health costs.

One issue clearly is that we just have more chronic disease. Chronic disease cost is driving about 75 percent of our total health spending as a country. We have now lots of diabetes, lots of cancers that are now considered increasingly a chronic disease. And, of course, the biggest one is cardiovascular disease.

We know that we pay more than other countries in terms of prices for health care. So that’s causing some of the increase. And, in fact, there was an increment in drug price inflation that fed into the price increase…

JUDY WOODRUFF: So costs are going up.

SUSAN DENTZER: Underlining health care costs are a big share of this.

Now, there is some effect from higher health insurance premiums, but it’s not the biggest driver. And the clearest way you can see this is, if you think about large employers in particular, most large employers who are employing 200 people or more don’t usually buy insurance, technically, for their workers. They pay those health costs out of their own pockets. They’re what’s called self-insured.

Well, their costs are going up just as fast as those costs of people who actually have insurance policies. So that’s what tells you that it’s really not insurance that is driving most of this increase right now. It’s really the underlying cost of health care and health spending.

JUDY WOODRUFF: And, as we mentioned, it’s part of a trend. We’re seeing it go up over the last decade. So, it’s not new but, it just seems to — it seems to be a big increase in one year.

SUSAN DENTZER: It clearly was a big increase. And we have had a couple of years where the increases had been much more moderate.

Now, it should also be said, though, that there are lots of signs on the horizon that there’s downward pressure on health spending and on insurance. For example, the White House has pointed out that the Federal Employees Health Benefits plan, which covers about eight million federal employees and their dependents, their costs for the next year are only going to go up about 3.8 percent.

So we’re seeing a kind of a mix of signals. This Kaiser survey is looking back over the last year. When we look forward, we see some downward pressure on health spending that could actually be quite beneficial.

JUDY WOODRUFF: And when you see this notion that almost a third of covered workers now in high-deductible plans that increasingly employers are saying, OK, your premium may be less, but you’re going to have to pay more an individual treatment that you get.

SUSAN DENTZER: Well, actually, in many circumstances, it’s the employees themselves opting for those high-deductible plans…

JUDY WOODRUFF: Ah. OK.

SUSAN DENTZER: … and for a very simple reason. They cost less. The premiums are lower for that from — than more comprehensive coverage.

And for 17 percent of covered workers, they actually have not only a high-deductible plan. They have a health savings account or something like that associated with it, so they can actually put dollars aside to pay for health expenditures. So, in some instances, it’s very much the employee deciding, hey, I can get a break on my health insurance costs by going into these policies. Why not take it?

JUDY WOODRUFF: So, I hear what you’re saying about why all this is happening. And, of course, there’s political noise today as well. Republicans are out there saying, well, aha, this is connected to the Obama administration’s new health care law. The White House is saying, no, that it has something to do altogether with pricing.

And, I mean, how much is the new health care law a factor, or is it?

SUSAN DENTZER: It’s a minimal factor. Again, if you look at just the insurance piece of it, one — one clear thing that we know has happened in the past year is that 2.3 million more young adults are now covered.

And they got coverage through their families, their parents’ insurance plans, typically, because of a specific provision in the Affordable Care Act, which now enables individuals who are not offered an employer coverage themselves, young adults can actually stay on their parents’ policies up to the age of 26.

So we know that that was one clear impact of the Affordable Care Act. However, young adults are some of the cheapest people to insure.

JUDY WOODRUFF: Because they’re healthy.

SUSAN DENTZER: Because they’re, relatively speaking, healthy.

JUDY WOODRUFF: Yes.

SUSAN DENTZER: So that could not really have driven the cost increase.

Best guess is maybe, maybe 1 or 2 percentage points of this 9 percent increment was possibly due to the Affordable Care Act, but more likely it’s these other factors that are driving the situation.

JUDY WOODRUFF: Just quickly, Susan, all this takes place with a backdrop of the idea that there are less overall employer-sponsored health care coverage, that that is less and less a part of the health insurance picture, that fewer employers want to do that.

And it’s my understanding that’s a trend that’s taking place, even as we focus today on the cost of employer-sponsored care.

SUSAN DENTZER: That has been a long-term trend, especially for small companies. If you’re working in a company that has 200 or more employees, about 97 to 99 percent of those firms continue to offer health insurance.

If you drop down to very small companies, three employees, nine employees, that coverage clearly has been eroding. And, actually, interestingly, last year, in the same survey, there was a big uptick of coverage that seemed unexplainable. Now that’s disappeared. And now we see again coverage for those smaller firms has been eroding.

Now, we are several years away from the full implementation of the Affordable Care Act. So we will have to see what happens when subsidies begin to kick in and other things take effect to broaden insurance coverage.

JUDY WOODRUFF: Well, a lot of factors at play, and we’re just glad we have you here to help us understand it.

Susan Dentzer, thanks very much.

SUSAN DENTZER: Thank you, Judy.