Health insurance costs are growing faster than income in all 50 states, a new study says, and workers are feeling the pinch in rising out-of-pocket costs.
Workers who receive health insurance through their employer are spending more of their income on premiums and deductibles but their wages are not keeping up with the increases, according to a report released Thursday by The Commonwealth Fund, a private foundation that supports independent research on health policy reform.
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Oregon is among 12 states that have seen a slowdown in the growth of employer-sponsored health insurance premiums from 2010 to 2013, following passage of the Affordable Care Act, according to the New York City-based foundation.
However, that small measure of relief has been more than offset by the larger trend of insurance costs claiming a steadily growing share of workers’ income, the foundation says.
The new study, assessing state-by-state trends in premium and deductible growth, comes just 30 days after a similar study analyzing national trends in the cost of health insurance coverage. Both reports cover the years 2003 to 2013 and look only at employer-provided coverage.
“Growth in employer premiums and deductibles slowed in many states after passage of the Affordable Care Act,” said Sara Collins, a vice president at The Commonwealth Fund and a coauthor of the Jan. 8 report. “However, slow wage growth means working families in every state are being squeezed by health care costs.”
Dr. David Blumenthal, president of The Commonwealth Fund, said in a statement accompanying the Dec. 9 report, “As employers struggle to keep health insurance premium costs manageable, they are asking their workers to pay a larger share of their insurance costs. The recent slowdowns in overall health care costs are promising, but clearly they have not translated into relief for workers, who are spending more of their incomes on health coverage.”
Laura Cali, the Oregon state insurance commissioner, said Wednesday that while she has not yet seen a state-by-state analysis, the national trends are consistent with what she has seen in Oregon.
“We have seen a slowing in the growth of premiums in the last couple of years,” she said. “We also have seen a tendency toward higher deductibles and more cost-sharing being pushed to employees as a way of keeping premiums in check.”
Cali said it’s hard to say definitively what has caused premium rate increases to slow down, but that it’s likely a combination of the new federal health care law and increasing competition in the marketplace.
The Affordable Care Act requires insurers to spend at least 80 percent of their premium revenue on actual health care, leaving the remaining 20 percent or less for overhead and profits, she said. Previously, there was no requirement.
In addition, dozens of insurance companies in Oregon are competing for market share among the state’s small employers, those with 50 or fewer employees, and that’s had a moderating effect on costs, Cali said.
“There’s still more to do and a lot of things in progress that will help us,” Cali said, “but the increased transparency and competition that’s happened in the last several years in having a positive effect for consumers.”
Commonwealth Fund findings
The two Commonwealth Fund reports cite several measures pointing to the growing burden on workers, even as the cost of health insurance premiums has begun to slow somewhat since passage of the Affordable Care Act.
- Premiums grew more slowly in 31 states and the District of Columbia between 2010 and 2013, following passage of the federal health law, than between 2003 and 2010. Premiums grew 4.1 percent annually between 2010 and 2013, compared to 5.1 percent a year from 2003 to 2010, before the law was passed.In Oregon, the annual premium growth rate for individual coverage fell from 6.4 percent between 2003 and 2010 to 1.7 percent after the act was passed. For family coverage, the annual growth rate dipped from 6.5 percent before the ACA to 4.8 percent after its passage.
- Average family premiums, including both the employer and employee contributions, amounted to 20 percent or more of the median income in all but 13 states and the District of Columbia in 2013, compared to just two states in 2003.In Oregon, total premiums equaled 23 percent of the state median income in 2013, compared to 15 percent in 2013. The U.S. average was 22 percent in 2013 and 15 percent in 2003.
- In 15 states, employees’ annual payment for their share of premiums doubled or more during the 10-year period.In Oregon, workers paid 3.3 percent of their median income in 2003 versus 5.6 percent in 2013 – a shade below the U.S. averages of 3.4 percent in 2003 and 5.7 percent in 2013.
- Deductibles also doubled or more in all but six states and the District of Columbia since 2003.In Oregon, workers’ deductibles rose from 1.7 percent in 2003 to 4.2 percent in 2013 – a steeper climb than the U.S. averages of 1.9 percent in 2003 and 3.8 percent in 2013.
- Eight in 10 workers with employer coverage now have a deductible, and more workers are also facing high deductibles.In 2003, no state had an average deductible of as much as $1,000. By 2013, average per-person deductibles exceeded $1,000 in all but three states and the District of Columbia and climbed over $1,500 in seven states.In Oregon, the average deductible for an individual plan tripled, rising from $430 in 2003 to $1,295 in 2013.
Slow wage growth is compounding the hit on workers’ wallets.
“While premiums rose 60 percent between 2003 and 2013, incomes grew only 11 percent,” according to the Commonwealth Fund. “Employee premium contributions, meanwhile, increased 93 percent over this period.”
The Commonwealth Fund attributed a dip in health care spending since 2009 to ACA reforms aimed at containing administrative costs and profits, but also noted the role of the recession.
“An analysis of claims data from employer coverage finds that during the recessionary years and continuing into 2013, workers and families reduced use of services, including hospital care and elective surgery,” the fund said in a briefing paper Thursday. “Prices paid for hospital, physicians and medications also grew more slowly.”
An insurance broker’s view
Patrick O’Keefe, an owner and managing partner of Cascade Insurance Center in Bend, and a past member of the Cover Oregon Consumer Advisory Committee, said while it’s clear employees are shouldering more of their health care costs, it’s not as certain that insurance premiums will level off in the longer term.
He said the slowing of annual premium rate increases is more of a flattening than a sharp trend, citing the 1 percentage point differential between pre- and post-ACA rate hikes. The real indicator of change will come after employers have had more experience with the federal health law.
“Until we get into 2016 or 2017, that’s where we’re going to see the market settling,” he said. “When we’ve had a couple of years of people being able to get whatever they want in a policy.”
For now, the trends in Oregon are unmistakable, O’Keefe said.
Employers are shifting away from a defined benefit plan and working with insurance carriers to offer three to five plans, with differing levels of costs, benefits and deductibles.
Employers also are asking workers to pay more of their premiums and offering plans with higher deductibles, some as high $5,000 annually.
“The preponderance of employers are paying 80 percent (of premiums) for the employee,” O’Keefe said, “but some are paying 50 percent and it tends to be for lower-wage employees, which is kind of a double whammy.”
Long before the ACA became law, Oregon employers have been required to pay at least 50 percent of employee premiums, though they are not required to pay for dependents, O’Keefe said. Under the ACA, an employer must pay at least 50 percent to be eligible for a federal tax credit.
— George Rede
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