Fewer Small Firms Offering Health Insurance
Sept. 19--Premiums for employer health plans continue to grow at historically low rates, yet a growing number of small firms are finding the tab is too steep.
Annual family premiums for employer-sponsored health insurance rose an average of 3 percent to $18,764 this year, marking three consecutive years of growth rates in the low single-digits, according to an annual report on premium trends released Tuesday by the California-based Kaiser Family Foundation. On average, nearly 70 percent of the premium is picked up by employers.
At companies with fewer than 50 workers, the share offering health benefits fell to 50 percent, the survey found, down from 59 percent in 2012.
"While the rate of [premium] increase may have slowed down, the number -- the cost -- is just high," said Drew Altman, the foundation's chief executive, during a conference call with reporters. "And so it's a struggle for them."
The Kaiser survey doesn't report state-level data on premiums or trends, but includes employers in Minnesota. Employer groups here have complained for years about the growing cost of health coverage, and pointed to declines in Minnesota in the number of small business health plans.
This summer, health insurers proposed a somewhat higher range of premium increases for small business health plans in 2018 compared with this year, which again prompted concern that small employers would drop coverage. Some argue, however, that such moves are unlikely given the tight labor market.
The premium trends for employer groups are starkly different from the insurance "marketplaces" for individuals that were launched under the federal Affordable Care Act (ACA). Nationwide, the average benchmark premium this year on the ACA health insurance exchanges is up 20 percent, the foundation reported, with bigger jumps in some states like Minnesota.
The individual market has been turbulent since major changes kicked in during 2014 with the ACA, which prohibits insurers from deny coverage to individuals based on pre-existing conditions.
Why rates have been so stable in the employer market is something of a mystery, Altman said. At least part of the explanation has to do with increasing deductibles and "cost sharing" rules that pass more expenses to individuals when they use care, although deductible levels held fairly constant in 2017.
"If this is the new normal, it's not a new normal that people are happy with," Altman said. "And they have good reason not to be happy with it."
The cost of family coverage in employer plans increased 4 percent in 2015 and 3 percent in each of the following two years, according to the survey.
The 2017 rate of increase is similar to the rise in worker wages at 2.3 percent, Kaiser reported, as well as inflation at 2 percent. Since 2012, average family premiums in employer plans have increased by 19 percent, which is a much slower rate than the cumulative increases of 30 percent between 2007 and 2012, and 51 percent between 2002 and 2007.
Employer plans are the largest source of health insurance in Minnesota, with state figures showing about 55 percent of residents here were covered by employer plans during 2014.
The Kaiser survey found that workers in 2017 are contributing on average $5,714 per year toward premiums, which is 31 percent of the total. The survey found that workers at small firms (3 to 199) workers contribute more on average than those at large firms -- $6,814 at small firms compared with$5,264 at large firms.
One reason is that small firms are three times as likely as large ones, the survey found, to contribute the same dollar amount to coverage whether or not a worker enrolls family members. Among small firms that don't offer health benefits, most said costs were too high or the business was too small, according to the survey.
The contrast in premium trends in the employer group market, vs. Minnesota's individual market, has been particularly stark.
On Minnesota's MNsure health insurance exchange, for example, the premium for the "benchmark" silver plan increased by 23 percent in 2016 and 51 percent in 2017. People at certain income levels obtain federal tax credits via MNsure, and after factoring those subsidies the rate of increase in out-of-pocket premium costs grew at 9 percent in 2016 and 8 percent in 2017 -- still faster than the growth rate for employer groups.
Insurers in Minnesota's have proposed more modest premium increases for 2018, which primarily serves people under age 65 who are self-employed or don't have access to coverage from their employer.
The premium trends in the individual market have garnered a great deal of public attention in recent years, Altman said, leading to misconception among people in employer plans that the trends somehow impact what they are paying for care. The individual market includes new "marketplace" insurance exchanges like MNsure that were launched as part of the ACA.
"While the marketplaces seem to get all the attention, the much larger employer market where more than 150 million people get their coverage is very stable," Altman said in a statement.
Twitter: @chrissnowbeck
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