Slower Increase in Health Care Costs
October 2, 2007
by Employment & Labor Law / Employee Benefits Group
Stinson Morrison Hecker LLP
Copyright © 2007
"Premiums for employer-sponsored health insurance rose an average of 6.1 percent in 2007, less than the 7.7 percent increase reported last year, but still higher than the increase in workers’ wages (3.7 percent) or the overall inflation rate (2.6 percent)," according to a September 11, 2007 study by the Kaiser Family Foundation.
Percentage Increase – "The 6.1 percent average increase this year was the slowest rate of premium growth since 1999, when premiums rose 5.3 percent. Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation has gone up 17 percent."
Total Premium Costs – "The average annual total premium cost is $4,479 for single coverage and $12,106 for family coverage."
Employee Contributions – "About 80% of workers with single coverage and 94% of workers with family coverage contribute to the total premium for their coverage. The average annual worker contributions for single and family coverage are $694 and $3,281, respectively, and are significantly higher than the amounts reported in 2006." On average, covered workers pay 16 percent of the overall premiums for single coverage and 28 percent for family coverage – shares that have remained relatively stable in recent years.
Deductibles – "The average general annual deductibles (for workers with a deductible) for single coverage are $461 for workers in PPOs, $401 for workers in HMOs, $621 for workers in POS plans, and $1,729 for workers in a high deductible health plan with a savings option."
Pre-Tax Benefits – "Overall, 61% of firms that offer health benefits allow workers to use pre-tax dollars to pay for their share of their health premium costs. Fewer firms (22%) offer a Flexible Spending Account, in which workers can set aside pre-tax money to cover out-of-pocket health care spending. In both cases, large firms (200 or more workers) are far more likely to offer these benefits than small firms."
Hospital Copayment – "About 12% of workers in PPOs, 15% of workers in HMOs, and 23% of workers in POS plans have a separate hospital deductible. The average hospital deductibles are similar across plan types ($334 for PPOs, $323 for HMOs, and $340 for POS plans)."
Hospital Admission – "Forty-three percent of covered workers have coinsurance for hospital admissions in addition to any deductible with an average coinsurance rate of 17%. A smaller percentage of workers (20%) have a copayment, which averages $208."
Copayment for Doctor Visits – "The majority of workers have copayments or coinsurance for physician office visits. Among the 79% of workers with copayments for in-network office visits, 75% have a copayment of $15, $20, or $25 per visit with a primary care physician. Workers that “see out-of office network physicians are more likely to pay coinsurance (80%) rather than copayments (9%)."
Prescription Drug Copayment – "For plans with three- or four-tiered drug cost-sharing, the average copayments were 11% for generic drugs, $25 for preferred drugs, and $43 for non-preferred drugs. Copayments for fourth-tier drugs, which may include costly biological agents and lifestyle drugs, averaged $71."
Out-of-Pocket Maximums – "Out-of-pocket limits vary considerably; for example, among covered workers in plans that have an out-of-pocket limit for single coverage, 22% are in plans with an annual out-of-pocket maximum of $3,000 or more, while 28% are in plans with out-of-pocket maximum of less than $1,500. For family coverage, 24% of workers are in plans with an out-of-pocket maximum of $6,000 or more and 10% are in plans with a limit of less than $2,000."
Domestic Partner Benefits – "Nearly half (47%) of all firms that offer health benefits make them available to unmarried opposite-sex domestic partners, and nearly 37% offer such benefits to same-sex partners."
Retiree Coverage – "The percentage of large firms (200 or more workers) offering retiree health benefits in 2007 is 33%, similar to the 2006 rate of 35%. Among large firms that offer retiree health benefits, 92% offer health benefits to early retirees and 71% offer health benefits to Medicare-age retirees."
Bottom Line – "Many employers indicate that they expect to make significant changes to their health plans and benefits in 2008. Overall, 21 percent of firms say they are ‘very likely’ to raise workers’ premium contribution next year. Some firms also say they are ‘very likely’ to increase office visit cost-sharing (13%), increase deductible (12%) and increase prescription drug cost-sharing (11%). Very few firms say they are ‘very likely’ to restrict eligibility for coverage or drop health coverage altogether."
Stinson Morrison Hecker LLP is one of the country's largest law firms with more than 360 attorneys in more than 45-industry-focused areas. If you would like more information regarding this summary, please contact one of our Employment & Labor Law and Employee Benefits attorneys.
Law at Work is designed to give general information and is not intended to be a comprehensive summary or to treat exhaustively the subjects and matters covered. The information appearing herein does not constitute legal advice or opinions. Such advice and opinions are provided only upon engagement with respect to specific factual situations. Nothing contained herein shall be considered as an admission in any matter or controversy.
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