Frustration Grows Over ‘Relentless’ Employer Plan Premium Rise

  • The premium costs of employer-sponsored health plans increased by 4% this year, according to the Kaiser Family Foundation’s (KFF) annual Employer Health Benefits Survey. KFF analysts and health care purchasers alike say the annual growth rate in health care costs — employer plan premiums for a family have grown by 47% since 2011 and 283% since 1998, according to KFF — causes unsustainable financial strain for both employers and plan members.

    KFF also identified several emerging trends in employer coverage driven by cost growth and the COVID-19 pandemic. Deductibles and other forms of member cost sharing have increased in recent years. The share of employees in high-deductible plans declined slightly in 2021, but accounted for roughly a quarter of employer enrollment, a similar figure to recent years. Employer insurance experts have mixed opinions on whether these trends will continue. Meanwhile, in response to the pandemic, firms expanded their telehealth offerings and behavioral health benefits this year.

    But health plan purchasers tell AIS Health that health care cost growth has once again become their most important challenge now that firms have adjusted to the new pandemic normal, even though this year’s premium growth was relatively modest compared to the last few years.

    “Over the years, we’ve compared the cost of family coverage — the premium — to the cost of a new car. And this year the annual cost to cover a family of four is almost the same,” KFF’s Matthew Rae said during a Nov. 16 briefing on the survey.

    “The increase in cost is unsustainable for American employers,” Dan Mendelson, CEO of Morgan Health, tells AIS Health, a division of MMIT. Morgan Health is JPMorgan Chase Co.’s health care services and venture capital arm. “Costs keep going up. During the pandemic year, what you see is that employers absorbed more of that cost. My sense is that many employers really felt like they could not pass on the cost of the increased expense to employees given what’s going on with the pandemic.”

    “It’s encouraging that the COVID pandemic has not caused widespread disruption to employer sponsored health benefits. The employer-sponsored system showed a fair amount of resiliency in the face of the pandemic. And in fact, we did see some improvements, such as increased access to services via telehealth and improved access to behavioral health services,” Bill Kramer tells AIS Health. Kramer is executive director for health policy at the Purchaser Business Group on Health (PBGH).

    “But I think it’s frustrating and discouraging because so much does need to change. I’ll point specifically to the relentless increase in premiums,” Kramer adds. “It’s just the same story over and over again. No matter what’s going on, premiums go up, no matter what’s going on with the economy. With improvements in care and emphasis on equity, premiums [still] just continue to grow steadily…we’ve made little or no progress in addressing the enormous inefficiency and waste in our health system.”

    All that said, premium growth was lower than it has been in recent years.

    “Compared to the rapid premium increases of the early 2000s, we saw relatively modest premium increases this year. On average, family premiums increased about $900, or 4%. You can compare this to a 5% increase in workers’ earnings and roughly a 2% increase in inflation through the first three months of the year,” Rae said.

    However, Mendelson points out that “the fact that there was a respite for a year does not take the pressure off of the broader cost trends and everything that goes with it. From my perspective, employers really need to get a lot more aggressive about ensuring that there’s value that’s coming from the plans that they’re operating.”

    Lower Utilization Played a Role

    Rae said the slower premium growth could be partially attributed to depressed utilization. He pointed out that the survey found utilization continued to stall in 2021, as patients were wary to return to health care facilities with COVID-19 still spreading. Several large, publicly traded carriers also reported utilization below “baseline” in their most recent earnings calls, though they said persistent COVID-19 costs meant that overall medical costs were similar to previous years.

    In any case, “workers can be asked to cover vastly different portions of the premiums at different firms,” Rae explained. “One of the ways this is important is in regards to small firms. Covered workers at small firms often face relatively high premium contributions to include dependents. Three in 10 workers at small firms contribute more than half the premium for family coverage.”

    “The other way that plan enrollees pay for health care is cost sharing when they use services,” Rae continued. “Deductibles in particular have grown in recent years. Among workers with a general annual deductible for single coverage, the average deductible is just about $1,700.…Over time, both the percentage of covered workers with a deductible and the average deductible have increased.”

    According to the survey:

    • 67% percent of covered workers in firms offering health benefits can choose from one or more PPOs (preferred provider organization plans);
    • 58% work in firms that offer one or more HDHP/SOs (high deductible health plans and/or those with a savings option);
    • 23% work in firms that offer one or more HMOs (health management organizations);
    • 10% work in firms that offer one or more POS (point-of-service) plans; and
    • 2% work in firms that offer one or more conventional plans

    The survey also found that small companies are more likely to offer high-deductible plans and limit access to other types of plans. According to the survey, 60% of small firms reported that “at least some workers can only choose HDHP/SO” plans, while that was true for only 31% of large companies. Overall, 26% of workers covered by employer health insurance were enrolled in a high-deductible plan.

    Health care purchasing experts tell AIS Health that employers are beginning to realize that high-deductible plans have deep flaws.

    “More and more of the data seems to show that there are some unintended negative consequences from high-deductible health plans, especially for lower-income employees,” Candice Sherman, CEO of the Northeast Business Group on Health (NEBGH), tells AIS Health. NEBGH is a purchaser group whose members include large firms, such as Comcast Corp. and Verizon Inc., unions and public employee plans. Its members also include the nation’s largest health insurance carriers: UnitedHealthcare, CVS Health Corp. and its Aetna arm, Anthem, Inc., and Cigna Corp.

    “There’s been some loosening up of the regulations that allows some first-dollar coverage for high-value classes of medications and services, which is certainly helpful. But I do think that [plan sponsors] are looking at high-deductible plans a little bit more closely,” Sherman says. She points out that high deductibles can deter patients from accessing necessary care. Sherman says plan sponsors have begun to revamp their benefit offerings to address diversity, equity and inclusion concerns over the last year — and points out that high-deductible plans’ deterrent effects are disproportionately harmful to people of color, who generally have less household wealth than white people due to institutional racism.

    “I think the issue of equity versus equality is an interesting issue to contemplate when it comes to these kinds of things,” Sherman points out. “We may have a desire to treat everyone equally. But what does that mean in terms of people’s ability to actually access and receive quality health care?”

    HDHP Use Has ‘Flattened Out’

    The future of high-deductible plans is unclear. Kramer says that “it appears that the use of high deductible plans has flattened out in recent years” as employers have had “a recognition that that benefit design’s usefulness has flattened. It’s not worthwhile pushing that further. Most employers have recognized the need to do much more than that.”

    However, Mendelson expects high-deductible plans will capture a larger share of the employer market in the future.

    “I expect high deductible plans to continue to grow,” Mendelson says. “I think that the respite that you see this year is a result of the pandemic and the desire of employers to enable employees to engage. I think that employers have to do something at this point. Whether it’s high-deductible plans, or [what] I think [is] a better strategy for employers — moving into value-based arrangements that hold providers accountable for improving affordability and health equity….But high-deductible plans [are an option] if you aren’t going to put in the time and effort required to structure arrangements like that.”

    Despite the gloom about prices, improved telehealth benefits were a bright spot. The survey found that 95% of employer plans now cover some sort of virtual care, up from 85% in 2020. And 19% of small employers and 35% of large employers increased the number of covered telehealth services covered by their health plan, while 15% of small employers and 27% of large employers reduced or eliminated virtual care cost sharing.

    Behavioral Health Resources Increase

    The same is true of behavioral health benefits, albeit on a smaller scale. The survey found that 16% of employers “developed new [behavioral health] resources, such as an employee assistance program,” while “31% of employers expanded the ways through which enrollees could get mental health or substance abuse services, such as through telemedicine.”

    “Telehealth has the potential to address patient needs and patient interests very cost effectively,” Mendelson explains.

    “I think telehealth was an under-utilized technology before the pandemic, and now people recognized how well it can work from a patient’s point of view, as well as the provider’s point of view,” Kramer adds. “I think there’s tremendous opportunity. That’s been demonstrated. Now I think we need to do is figure out a way to integrate telehealth services with a person’s overall care… not simply an add on or something that actually might contribute to more fragmentation of services.”

    Contact Kramer via James Chisum at james@millergeer.com, Mendelson via Pamela Harris at pamela.l.harris@jpmorgan.com and Sherman via Ed Emerman at eemerman@eaglepr.com.

    Click here for a pdf of the full issue

  • Peter Johnson

    Peter has been a reporter for nearly a decade. Before joining AIS Health, Peter covered a wide variety of topics in his hometown of Seattle, where he continues to live. Peter’s work has appeared in publications including The Atlantic and The Stranger. Peter attended Colby College.

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