2012 Health Increase Rates Increase by 4 Percent

Friday, October 12, 2012

The Kaiser Family Foundation and Health Research; Educational Trust 2012 Kaiser/HRET Employer Health Benefits Survey indicates a 4% increase in the cost of family health insurance. The survey of some 2,121 firms, representing various organizations by employee size, regional location, and business sector, found that average annual premiums in 2012 for single and family coverage are $5,615 (3%) and $15,745 (4%), respectively. The study reports that since 1999, premiums have increased from $2,196 to $5,616 for single and from $5,791 to $15,745 for family coverage; in a period of 14 years. Increasing by a multiple of 2.56 and 2.72 times for single and family coverage respectively since 1999.

An interesting finding is the percentage of employees who when offered health care actually enroll has declined slightly from 66% to 64% since 1999. In the face of increased emphases on health care benefits during the last decade, this seems to be a contradiction in terms. The employee’s portion of the premium cost may be one possible factor.

While employee cost may contribute to an employee’s enrollment decision, the Kaiser report indicates that most employees are paying between 17% and 20% of single premiums, regardless or company size or union affiliation. Strangely, small firms, those under 200 employees, have a lower employee premium cost percentage than their larger counterparts. This may be in part due to the fact that smaller firms are often at a competitive disadvantage in the range and scope of benefits offered to workers.

Where smaller firms are significantly different in the area of cost is with family coverage. On the average, employees of smaller firms surveyed are paying 35% vs. 25% for larger firms. A strong indication that smaller firms are willing to address cost issues with singe coverage but may not be willing to extend the same treatment for family coverage.

As most casual observers can attest to, deductibles have been on the increase. According to the Kaiser report, the percentage of firms with a $1,000 deductible has risen from 16% to 49% for small firms and from 6% to 26% for large firms, since 2006. Obviously, a higher deductible translates into lower costs for the plan and more for the employee. Not so obvious is the impact on consumption, while some would argue that deductibles restrict access to care, others point out that deductibles help to educate the employee to the real cost of care. Without a deductible, an office visit covered only by a $20-$35 co-pay screens the employee from the true cost of $150-$250.

Since 1988, the mix of health care plans offered has undergone dramatic shifts. Once accounting for over 70% of the market space, Conventional plans have eroded to less that 1%. HMO’s have waxed and waned from 16% in 1998 back to 16% in 2012. Similarly, POS plans saw modest growth from 1988 until 2001 and have been on the decline ever since. High deductible health plans hit the radar in 2006 at 4% and have grown to 19% in 2012. PPO plans have replaced Conventional plans as the mainstay of the market at 56%, reaching a current peak of 61% in 2006.

Clearly, the message from the Kaiser Family Foundation and Health Research Educational Trust 2012 Kaiser/HRET Employer Health Benefits Survey is, health cost continues to increase and that many of the efforts of everyone have done little to mitigate that fact.