Employer health plan deductibles see big 5-year jump
A report out today puts numbers behind what hit many workers when they signed up for health insurance during open enrollment last year: deductible shock.
Premiums for employer-paid insurance are up 3% this year, but deductibles are up nearly 50% since 2009, the report by the Kaiser Family Foundation shows.
The average deductible this year is $1,217, up from $826 five years ago. Nearly 20% of workers overall have to pay at least $2,000 before their insurance kicks in, while workers at firms with 199 or fewer employees are feeling the pain of out-of-pocket costs even more: A third of these employees at small companies pay at least $2,000 deductibles.
"Skin-in-the-game insurance" is becoming the norm, says Kaiser Family Foundation CEO Drew Altman, referring to the higher percentage of health care costs employees have to share.
Deductibles will keep going up as companies try to keep their own health care costs down by raising the amount of cost-sharing workers have to bear, says Gary Claxton, a Kaiser Family Foundation vice president who co-authored the annual study.
At Noblehurst Farms, a dairy farm in Linwood, N.Y., the premiums went up, but deductibles held steady this year because the 40-member plan was already a high-deductible one started four years ago. Everyone, from the owners to the calf managers, pays a $1,500 deductible for a single person's plan and $3,000 for a family plan, says Sarah Noble-Moag, a director of the company, which participated in the Kaiser survey. Though some employees were skeptical at first, they've come to accept the plans and appreciate the $1,000 the company contributes to their health savings accounts to help offset the deductibles, she says.
"As an employer, you see employees take a big hit when they have any kind of medical expense," says Noble-Moag, whose grandfather formed the farm's corporation in the 1960s. "It can bankrupt a person."
The news about deductibles could temper some of the excitement uninsured workers may have as the Jan. 1 deadline approaches for businesses with 100 or more workers to offer coverage. Although the new Affordable Care Act-compliant plans will have to cover preventive care, such as physicals and mammograms, the plans may not be all that appealing because of their high cost-sharing and deductibles for other medical services. That's especially true for low-wage workers, Claxton says.
The 3% increase in premiums this year brought the average annual premiums for employer-sponsored family health coverage to $16,834. Workers on average pay $4,823 annually toward the cost of a family plan, and the rest is paid by employers.
The high cost of insurance has led some companies to hope for another delay in the employer mandate deadline for offering coverage, which was extended once by President Obama.
Nancy Taylor, a health care lawyer with Greenberg Traurig who represents many chain restaurants, says she has had to warn some clients that they need to plan for open enrollment and not bank on another delay.
"It's a hard time right now," Taylor says.
Kaiser estimates that 7,000 firms with more than 100 employees don't offer any of them health insurance, while 115,000 offer coverage to only some of the workers. Some predict many smaller businesses will opt to pay the $2,000-per-employee penalty, rather than the premiums.
"Companies that have coverage are keeping coverage, and those who haven't are more likely to pay the penalty," says Dave Osterndorf, a chief actuary at benefits consulting firm Towers Watson.
Although some may believe non-compliance costs less than meeting the mandate, companies wouldn't get anything for it, says Allen Wishner, CEO of Flexible Benefit Service, a general insurance agency in Rosemont, Ill.
"Today's workers are looking for more, not less, and employers have always offered benefits to compete for talent," Wishner says. "Will employers want to pay (the penalty) and get nothing in return?"
