August 14, 2014 | FAH Hospital Policy Blog
A new survey out this week by the National Business on Group Health (NBGH) examines health care benefit cost growth for employer-based health insurance in 2015, polling nearly 400 large employers across the U.S. The survey finds that employers expect to limit their benefit cost growth to 5 percent, below their 2014 growth rate. One of the key reasons cited by employers in lowering their cost growth rate is shifting greater burden and cost-sharing responsibility onto the consumer.
The CEO of NBGH adds:
“Our survey shows that many employers are, in fact, taking necessary steps to rein in costs. This includes partnering with workers to engage in health care decisions and educating them to be better health care consumers, as well as sharing more costs with workers and narrowing their benefit options.”
The survey by NGBH reinforces the findings of a July study by Dobson | DaVanzo that examines how & why consumers continue to perceive that the growth in their health costs is escalating at the same time that the growth in national health care spending and prices is decelerating. Dobson | Davanzo notes, for example, that hospital prices are increasing at a historically low annual rate of only 0.9 percent from December 2013 to June 2014. This consumer paradox is a result of a new paradigm in health plan benefit design.
As the health care marketplace experiences many key structural changes, so too do health insurance plans. These new plans place a greater emphasis on out-of-pocket spending (premiums, deductibles, cost-sharing). The NBGH survey explains that shifting more cost sharing onto the consumer enables benefit cost growth for employers to stay at these low levels.
According to Dobson | DaVanzo, worker premium contributions have grown 114% from 2010-2013. This paradigm shift is occurring during a time of modest wage growth – just 31% over the same time span. Dobson also notes some other trends in out-of-pocket (OOP) costs and changing health benefit plans that are a result of this new plan paradigm:
- From 2006-2013, the average deductible for family coverage increased more than 75%, an increase of nearly $1,000.
- In that same span, the number of workers with high-deductible health insurance plans increased more than 5 times, from 4% to 26%, with the typical plan deductible totaling more than a family’s available savings.
- Out-of-pocket maximum limits are growing – half of families enrolled in plans have out-of-pocket limits exceeding $6,000, a 32% increase from 2010 to 2013.
- Employees’ share of medical costs (premium + OOP) grew by 42% — from $6,824 in 2009 to $9,695 in 2014.
Greater cost-sharing, and higher out-of-pocket costs combined with narrowing benefits and provider choice are the new normal in this era. This is why the consumer paradox continues in tandem with an enduring national spending slowdown. As new evidence and additional studies analyze the consumer paradox, the FAH reminds policymakers that a critical priority in health care is to protect and preserve the national health care spending slowdown, so that everyone can share in the associated savings.