It’s the End of the World as We Know It

The news of 25% rate hikes for health insurance has pundits screaming that the sky is falling for the Affordable Care Act’s (ACA) Marketplaces has. Amid the tumultuous news, people should remember that these rate hikes affect fewer than 3% of Americans. Almost half of Americans get covered through employer sponsored health insurance (ESHI), where premium increases are much more modest. In fact, the annual Kaiser Family Foundation/Health Research and Educational Trust survey provides great perspective on changes to ESHI.

Source: Flickr/CC

Source: Flickr/CC

Continuing a trend that has been in existence for decades, premiums climbed only modestly. From 2015 to 2016, they went up about 3% with annual premiums totaling $6,435 for individual coverage and $18,142 for family coverage. Worker’s contributions for coverage was 18% for individuals and 30% for family coverage, similar to prior years.

Preferred provider organizations (PPOs) remain the most common type of coverage – with 48% of workers selecting them. However, their use is declining and that of high deductible health plans (HDHP) is on the rise. HDHPs now cover 29% of workers, up 8 percentage points. Confirming complaints common among today’s health care consumers, deductibles are rising – with 51% of workers having a deductible greater than $1,000.

Next year looks to be more of the same. Estimates obtained from Charles Gaba, suggest that ESHI premiums will increase by approximately 6% in 2017. So for the approximately 150 million Americans covered by ESHI, data confirm the impression that health insurance is progressively squeezing family budgets. But, the narrative of the 10+ million people who are facing steep premium hikes in the ACA Marketplaces will reverberate loudly in the ears of politicians, journalists, and policy wonks.

The optics of a 25% premium increases are abhorrent. How can we tackle this problem? First, we must start with the fact that health insurance costs reflect health care costs. Our nation must address this issue. Second, the ACA Marketplaces are too small. The bigger an insurance pool, the better risk is spread. Many of the rate increases are due to insurers not enrolling enough healthy people. Therefore, both subsides and penalties need to be higher to improve Marketplace participation. Third, the Marketplaces need more competition and the only way to do that – outside of a public option – is improving incentives for healthy customers.

commentary by Cedric Dark

Abstract

The annual Kaiser Family Foundation/Health Research and Educational Trust Employer Health Benefits Survey found that in 2016, average annual premiums (employer and worker contributions combined) were $6,435 for single coverage and $18,142 for family coverage. The family premium in 2016 was 3 percent higher than that in 2015. On average, workers contributed 18 percent of the premium for single coverage and 30 percent for family coverage. The share of firms offering health benefits (56 percent) and of workers covered by their employers’ plans (62 percent) remained statistically unchanged from 2015. Employers continued to offer financial incentives for completing wellness or health promotion activities. Almost three in ten covered workers were enrolled in a high-deductible plan with a savings option—a significant increase from 2014. The 2016 survey included new questions on cost sharing for specialty drugs and on the prevalence of incentives for employees to seek care at alternative settings.

PMID: 27628267  Claxton, G, et al. Health Affairs. 2016; 35 (10): 1908-1917.