WASHINGTON -- The increase in employer health premiums decelerated in 2007 for the fourth year in a row, a national study reported yesterday - but the study's authors don't expect the trend to continue much further.
Premiums for employer-provided health insurance increased in cost by 6.1 percent this year, compared with 7.7 percent in 2006, according to the annual survey of employers conducted by the Kaiser Family Foundation and the Health Research and Educational Trust. That's the lowest rate of increase since 1999.
But while there was "notable moderation," this year, "we've seen these periods of moderation before, and they never last," said Drew E. Altman, president of the Kaiser Foundation. "No one is celebrating in the real world because it just doesn't feel like moderation."
"It's still definitely a big financial concern," said Christie Moon, director of human resources for the Baltimore Symphony, one of the more than 3,000 employers that participated in the Kaiser-HRET survey.
Employers find "it's still increasing more than most other things in their business," said Peter Cole, a benefits consultant with Crawford Advisors in Hunt Valley, who helps medium-to-large employers design and negotiate their health plans. "A deceleration is not a reduction."
Cole and other consultants said their clients in the Baltimore area are generally seeing premium increases consistent with the Kaiser-HRET findings.
A one-year moderation doesn't produce much relief for employers and workers who have seen their health costs soar over recent years, Altman said. Premiums have risen 78 percent since 2001, the survey found - more than four times the 19 percent increase in employee pay over that period.
"If you boil it all down, the bottom line is that health insurance is becoming more and more unaffordable for average Americans and many businesses," Altman said. At an average cost of $12,100 for family coverage, he continued, health coverage costs as much as a worker at the newly increased federal minimum wage makes in a year of full-time work.
Some employers have dropped coverage altogether, the survey reported. About 60 percent of employers offered coverage in 2007, a statistically insignificant drop from 61 percent in 2006, but down substantially from 69 percent in 2000. "There's no question we're seeing a slow fraying of coverage in the employer-based system," said Altman, calling the steady decline over time "a slow drip, drip, drip."
Other employers have shifted costs to workers - the average family with employer coverage now contributes nearly $3,200 a year toward premiums, nearly double the amount from six years ago.
The Baltimore Symphony, for example, used to pay the entire premium for employee coverage but last year cut that to about 80 percent for its 60-person administrative staff. Its 90 musicians, whose benefits are set by a union contract, still get fully paid coverage for the least expensive plan, and contribute slightly if they choose more expensive coverage, according to Moon.
Also increasing over time, according to the Kaiser-HRET survey, are out-of-pocket charges such as deductibles (the amount the person must pay before insurance coverage kicks in) and co-payments (a partial payment with each service, such as $30 per prescription). Deductibles, for example, averaged $1,040 for a family with preferred provider (PPO) coverage, the most popular type-up negligibly from $1,034 last year but more than double the $407 average six years ago.
Cole, the Hunt Valley benefits consultant, said employers are becoming increasingly reluctant to increase out-of-pocket charges to workers.
"The appetite for that is hitting a limit," he said, with many deciding that further increases could discourage employees from seeking needed care, leading to increased absenteeism.
Employers nationally and locally are increasingly looking to control costs with programs that keep employees healthier, such as weight loss or smoking cessation, or that manage chronic conditions such as diabetes, said Tracy Watts, a senior consultant in the Washington-Baltimore office of Mercer Health and Benefits.
These programs, Watts said, are contributing to the moderation in the rate of increase. "The various things employers are doing to help people improve their health status are paying off," she said.
But indications are that premium increases may start to accelerate again.
Preliminary results from a national Mercer survey of employers that found a 6 percent increase in premiums this year - matching the Kaiser-HRET number - predicted an increase of 6.7 percent next year. Both Cole and Watts said their clients are generally being quoted increases in the 6 percent to 9 percent range for next year in this area.
'It will go up'
Altman and others said premiums generally follow a cycle, based in part on the profitability of insurers and on how much they are willing to hold prices down to gain market share.
"If you look at it over a period of time, what you will see is basically a roller coaster," tracking in part shifts in policy and in market forces that give insurers more negotiating power at some times, and providers - doctors and hospitals - more power at other times, said Gerard F. Anderson, a professor at the Johns Hopkins Bloomberg School of Public Health who has published several articles on health costs.
"We're on the down slope," he continued, "but it will go up in the future. What we don't see is evidence that obesity is under control or that the prevalence of chronic disease is declining."