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Health insurance costs have been rising at historically low rates over the last several years. Yet it may not feel that way to consumers.
While premiums — what companies and workers pay to buy health insurance– have been rising slowly, up-front deductibles are going up much faster. Those out-of-pocket increases, paid before insurance kicks in, mean patients are responsible for more of the cost when they get care, according to a report on employer-sponsored health plans by the research groups Kaiser Family Foundation and the Health Research & Educational Trust.
“While it’s absolutely true that we’ve been living in a period of an historic slowdown in healthcare costs, it’s almost invisible to consumers,” Kaiser Foundation Chief Executive Officer Drew Altman said in an interview. “What they pay for health care is going up at a time when their wages are relatively flat.”
Health insurance premiums rose just 3.8 percent this year, with workers paying $1,071 of the average $6,251 cost for individual coverage through their jobs, according to the report. Deductibles, however, climbed about 9 percent, and workers now pay an average of $1,077 a year in up-front medical costs for a single-person plan.
The trend has held over the past half decade. Since 2010, deductibles are up 67 percent, while insurance premiums are up 24 percent. Worker earnings, by contrast, rose just 10 percent over that period, according to Kaiser’s analysis of Bureau of Labor Statistics data.
Not only are deductibles rising, more workers are facing them. The proportion of health plans with a deductible rose to 81 percent last year from 70 percent in 2010.
There are two main reasons for the higher deductibles, and they’re connected. Employers are shifting costs to workers in part to avoid spending more themselves. And when workers have to pay a greater share of medical costs, they tend to use less, helping hold down overall increases.
“When you are trying to provide affordable coverage and low premiums for individuals, often times there are trade-offs, and deductibles are one of those trade-offs,” said Clare Krusing, a spokeswoman for the lobby group America’s Health Insurance Plans. She said rising medical costs account for higher out-of- pocket spending.
The CEOs of Anthem Inc. and Aetna Inc. appeared before a Senate subcommittee in Washington Tuesday, to testify on how their proposed mergers would affect the industry and health insurance prices.
Obamacare is another cause of the shift in costs. The 2010 Affordable Care Act penalizes high-cost health plans with what’s known as the Cadillac tax, starting in 2018. It’s a 40 percent levy on individual plans with premiums exceeding $10,200 or family plans costing more than $27,500. The average family premium in 2015 was about $10,000 less than that figure, Kaiser found.
“What we’ve seen is a gradual steady incremental growth in deductibles,” Altman said. “If the Cadillac tax goes into effect, we’re likely to see a spurt.”
More companies are also offering high-deductible plans paired with savings accounts: 24 percent of workers are in such plans, up from 13 percent in 2010. The high-deductible plans offer low up-front premiums, and higher shared costs for care.
Often, high-deductible plans are one option among several in a company’s insurance offerings. That lets employees pick plans with lower premiums, and use innovative feature like seeing a doctor via video chat to help contain spending, according to Beth Umland, director of research for health and benefits at the consulting firm Mercer.
“Along with the higher deductible, there are all these plan features that allow employees to make more cost-conscious decisions,” she said. “The high deductible provides a financial incentive for employees to use other cost-sharing opportunities.”
Employer efforts to limit spending can be found in two measures tracked by Mercer: how much firms are actually paying, and how much they’d have to pay if they didn’t make any changes to their health plans by doing things like increasing the costs shared by workers. In 2016, actual spending is projected to rise by 4.2 percent, while without changes like higher deductibles, totals costs would grow by an average of 6.4 percent. The 2.2 percentage point gap shows how employers are changing health benefits to limit spending.
“It’s a hard decision for employers to increase cost- sharing for their employees,” Umland said. “The health-benefit cost increase has been multiple times inflation for so long.”
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