Also, enrollment in the much-ballyhooed high deductible plans with health savings accounts and health reimbursement arrangements has not met expectations, according to the report, which was released September 26. Estimated total enrollment in high deductible health plans grew to 2.7 million people in 2006, up from 2.4 million enrollees in 2005.
The rise in health care premiums slowed for the third straight year. It dropped to 7.7 percent in 2006, down from 9.2 percent increase in 2005 and 11.2 percent increase in 2004.
"We are in a period of continued moderation in health care premiums, but no one should be celebrating too wildly," said Drew Altman, president and CEO of the foundation, during a conference call following the report’s release. "Health care costs are still going up."
Despite the slower rate of growth since 2004, cumulative growth helps explain why both employers and employees worry about whether they can afford health insurance. Since 2000, premiums paid by employers for family coverage have increased 87 percent.
The percentage of the premium paid by workers has remained constant since 2002 at 16 percent, but as the cost of premiums have escalated, workers are paying more out of their pocket. The average monthly amount workers contributed in 2006 to their health coverage is $53 for individuals, up from $28 in 2000; the cost to workers for family coverage is $248 in 2006, up from $135 in 2000.
For employers with minimum wage workers, the cost of family coverage, at $11,480, exceeds the annual income of a worker who works a 40-hour week and makes the federal minimum wage of $5.15. It helps to explain why rising health care costs have led to 5 million fewer workers on health insurance rolls since 2000, according to Jon Gabel, a co-author of the report and vice president of the Center for Studying Health System Change in Washington, D.C.
Meanwhile, low enrollment numbers in high deductible plans recorded by the foundation’s report revealed little enthusiasm for the plans by employees.
"We are not seeing a lot of people in these consumer driven plans yet," Altman says. "The hype is really out front of the reality."
Cost may have something to do with it. Though employers generally perceive high deductible plans as a way to save money, the plan’s average cost is not cheaper than the most popular plan chosen by employees—the PPO, or Preferred Provider Organization plan.
The annual cost to employers for a PPO plan is $4,385 for individuals and $11,765 for family coverage, compared to high deductible plan costs of $4,148 for individuals and $10,844 for families. The difference in cost is not significant enough to sway employers to offer high deductible plans or make it their only health care benefit, especially since employers must take on additional costs and risks to encourage enrollment in high deductible plans.
"When you implement a consumer directed health plan, you have to institute a tremendous amount of employee education," Gabel says. "You want to be confident it will save money and not hurt the morale of the workforce."
Overall, the rate of increase of premiums has slowed somewhat, in part because employer health benefits are less generous. Increased deductibles help to lower premiums.
Most of the decrease, though, is attributable to market cycles in the insurance industry during which premiums increase and decrease. Insurance companies may also have been more willing to keep premiums low to attract potential customers in a market where the customer base—employers offering health care—is shrinking, said Gary Claxton, the other author of the report. Nonetheless, this three-year downward trend will likely reverse itself in the near future.
"It’s hard to say how long this valley will last," Claxton says. "But it will end at some point."