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If health insurance premiums were in a horse race with inflation and employees’ wages, which would you bet on?
Smart money is on the premiums, and it turns out not to be much of a contest.
Results from the Kaiser Family Foundation’s annual survey of employer health benefits show that the premiums increased by 5% this year while wages went up by 3.4% and inflation, by 2%.
The average cost of family coverage reached $20,576 this year.
These numbers are a continuation of a longstanding trend. Premiums have risen by 67% over the past 10 years, more than double the amount (31%) that wages have risen and three times inflation (21%). The average annual cost of health insurance premiums for a family crossed the $20,000 threshold for the first time this year, reaching $20,576, an increase of $960 from last year’s average price of $19,616. For a single person the average premium this year was $7,188.
The results of the survey of more than 2,000 nonfederal public and private sector employers show that employers pay, on average, about two thirds the premiums with the remainder falling to the employees.
Annual cost of family coverage broke the $20,000 mark this year for the first time.
Suzanne Delbanco, executive director of the Catalyst for Payment Reform, says these numbers show that employers need payment and delivery reform. The cost increases may be incremental, but “still these expenses eat into workers’ disposable income more now than they ever have,” says Delbanco. “As a result, the need has never been greater for payment and delivery reforms and innovative benefit and provider network designs that connect plan members to high-value providers.”
Michael Thompson, president and CEO of the National Alliance of Healthcare Purchaser Coalitions, agrees: “Payment reform is critical if we are to reverse a trend of ever-increasing costs to instead reward health care value and performance.”
One reason employers may, at last, be ready to tackle health care costs is that cost shifting to employees—in the form of higher deductibles, coinsurance, and copayments—may have maxed out. “Employers have hit a wall in shifting excessive health care cost increases to employees,” says Thompson. The KFF survey found that more than a quarter (28%) of all covered workers are now covered by plans with a deductible of at least $2,000. One in eight (13%) have a deductible of at least $3,000.
Instead of shifting more costs to workers, employers are looking to change how they contract with health providers, says Steve Wojcik, the vice president for public policy at the National Business Group on Health. “I doubt that higher prices for health care and health insurance are sustainable over the long run. And, for that reason, we’re seeing an increasing willingness to think differently about health care,” he says. About half (51%) of the respondents to NBGH’s annual survey of its large employer members said they plan to use telehealth systems more widely in 2020, and 39% said they would focus on reducing the size and number of high-cost claims. Also, employers will make managing prescription drug benefit costs a high priority next year.
The NBGH survey showed that employers are ready to forge ahead with new forms of payment and delivery. About about a third (31%) of respondents said that next year they plan to spend their health care dollars on alternative payment models, ACOs or high-performance networks, or both.
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