Health care deductible costs continue to rise for workers

Sept. 23--American workers saw their out-of-pocket medical costs jump again this year as the average deductible for an employer-provided health plan surged nearly 9 percent in 2015 to more than $1,000, a major new survey of employers shows.

The annual increase, though lower than in previous years, far outpaced wage growth and overall inflation and marked the continuation of a trend that in just a few years has dramatically shifted health care costs to workers.

Over the past decade, the average deductible that workers must pay for medical care before insurance kicks in has more than tripled, from $303 in 2006 to $1,077 today, according to the report by the nonprofit Kaiser Family Foundation and the Health Research & Educational Trust.

That is seven times faster than wages have risen in the same period.

"It's a quiet revolution," said Drew Altman, the foundation president. "When deductibles are rising seven times faster than wages ... it means that people can't pay their rent. ... They can't buy their gas. They can't eat."

Raising deductibles and co-payments has traditionally been a way for employers to keep premiums in check.

The Kaiser report did not break down deductibles by state, but other groups have reported in recent years that Maryland is no exception.

The Commonwealth Fund released a report this year that found deductibles in employer-sponsored plans in Maryland rose to $1,075 in 2013 from $389 in 2003, or 176 percent.

Another survey of employers released by the benefits advisory organization United Benefit Advisors this year found that costs in Maryland remained below the national average in 2014, with in-network deductibles averaging $1,511 for a single person and $3,044 for a family.

Nationally, that survey found, deductibles for in-network services last year averaged $1,901 for a single person and $4,256 for a family, roughly the same as the year before.

The trend in Maryland might be influenced by its workforce, said Jonathan Weiner, professor of health policy and management in the Johns Hopkins University's Bloomberg School of Public Health.

"Both before and after health reform, employers and health plans have been trying to combat rising health care costs in part by increasing the portion the consumer pays via deductibles and co-pays," he said. "Maryland has been protected from this trend to some degree because of the large number of government employees with better insurance packages."

Higher deductibles mean that health plans pay less, Weiner said, but it also means that consumers will "think twice about getting expensive care. This hesitancy may be a good thing when care is unneeded, but many health policy experts are concerned that this could also keep patients from seeking needed care."

Some Maryland employers are beginning to look at so-called value-based coverage, where there is an incentive for employees to continue to get care but use lower-cost providers or eschew unneeded care, said Dr. John Chessare, president and CEO of the GBMC HealthCare system.

Chessare said that when his hospital, Greater Baltimore Medical Center, was facing higher employee health care costs, it saved millions by offering to eliminate out-of-pocket costs when workers use the facility's doctors. They can use other facilities but pay the added costs.

GBMC saved because compared with some other area hospitals, it has lower rates, as set by state regulators, because the others charge more to compensate for a larger number of poor patients who do not pay their bills and other factors.

"Frequently, large self-insured companies, for example, are just paying bills and they don't know they are paying a markup of 25 or 50 percent from one provider to another," he said.

Insurance rate regulators in the state also have noticed the increasing burden on employees, though they do not track the deductible amounts in employer plans. Officials at the Maryland Insurance Administration noted that many employers are setting up and contributing to health reimbursement accounts, which allow employees to set aside funds to pay out-of-pocket medical costs such as deductibles.

The increased health care costs come at a time when many workers are seeing little to no pay increases. Wages rose 1.9 percent from April 2014 to April 2015, according to federal data analyzed by the report's authors. Consumer prices declined 0.2 percent.

The new Kaiser report shows that premium growth remained modest in 2015.

An average employer-provided health plan cost a single worker $1,071 in 2015. That is down nearly 1 percent from 2014, marking the first time the survey has documented an absolute decline in workers' share of premiums. The average family plan cost workers $4,955, up 3 percent from last year.

By comparison, employees' share of health insurance routinely shot up by double digits in the early 2000s.

Businesses continued to pick up the bulk of the cost of health coverage for their workers, paying more than $5,000 on average for a single plan and more than $12,500 for a family plan.

Employers' rising health costs are often singled out as a cause for stagnant wage growth in recent years, as businesses have put money into health benefits that might otherwise have gone to workers' paychecks.

There also is growing evidence that the steep rise in deductibles and other out-of-pocket expenses such as co-pays are preventing workers from benefiting from the overall slowdown in the growth of health care costs.

A recent report by the Center for American Progress, a left-leaning Washington think tank, showed that employers are largely pocketing savings while passing along higher premiums and out-of-pocket costs to workers.

Unaffordable deductibles also are emerging as a major issue for health plans being sold on marketplaces created by the Affordable Care Act. The marketplaces, now in their second year, were designed to help people who do not get health plans through an employer.

Most of the nearly 10 million people in marketplace plans qualify for subsidies to offset their premiums, but deductibles in many plans are thousands of dollars.

The average deductible for a silver plan on marketplaces nationwide this year is more than $2,500, according to other research by the Kaiser Family Foundation.

"Deductibles are a big problem for consumers," said Peter Lee, executive director of Covered California, the largest state marketplace in the country.

Beyond costs, the new report contains more encouraging news about the endurance of employer-provided coverage, as 57 percent of employers reported offering benefits.

That number has been closely watched, as critics of the Affordable Care Act had charged that many businesses would begin to drop their health plans when the health law began offering Americans guaranteed coverage.

As has long been the case, many more large businesses provide health benefits, with 98 percent of firms with 200 or more employees offering their workers at least one health plan.

This year, employers with at least 100 full-time workers will have to provide benefits or pay a penalty. The requirement will apply to employers with at least 50 full-time employees in 2016, though Republicans and Democrats are working on legislation that could alter this so-called employer mandate.

The survey also provided more hints about the potential impact of another provision of the Affordable Care Act.

Starting in 2018, employers with particularly generous health plans will be subject to a new excise tax, known as the "Cadillac tax."

The new report indicates that about one in five large employers offer at least one health plan that would be subject to the new tax. And 13 percent of large firms offering benefits already have taken steps to avoid the tax, including switching to less generous plans.

That could be more bad news for employees.

"Those changes likely will shift costs to workers," said Kaiser Family Foundation Vice President Gary Claxton, who oversees the employer survey.

The tax, the last major provision of the 2010 law to go into effect, is fueling growing opposition from major business groups and labor unions, many of whose members have bargained for better health benefits in lieu of wage increases.

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