NIA | In The News | Cost Sharing Higher & More Complex in 2003, Survey Shows

While the rising cost of health care is not encouraging employers to drop coverage, in 2003, most are passing on more costs under more complicated cost sharing arrangements to employees. Over the past three years, the amount of the premium employees pay for family coverage has increased almost 50%, from $1,619 to $2,412, noted recently released data from the Kaiser Family Foundation and the Health Research and Educational Trust (HRET) in their 2003 Annual Employer Health Benefits Survey. The typical family health insurance policy now costs $9,068, with employers on average paying 73% and employees paying 27%. Single coverage, by contrast, now averages $3.383.

* Worker contributions for single coverage were stable, but contributions for family coverage rose by 13%; workers now pay on average $508 per year toward the premium for single coverage and, as noted above, $2,412 per year toward the premium for family coverage.

* Workers are also facing higher costs at the point of service, including higher deductibles for out-of-network services in PPO plans, higher co-payments for office visits in HMOs, and higher prescription drug payments across all plan types. For HMO coverage, a $10 copayment is no longer the most common copayment amount for physician visits. Thirty-five percent of covered workers in HMOs now face a copayment of $15, while 12% face a co-payment of $20. Additionally, significant proportions of covered workers in PPOs (55%) and POS plans (46%) face coinsurance rates of 30% or more for services received from non-preferred providers. "Such substantial cost sharing for out-of-network services may substantially diminish the value to enrollees of these broader choice options," the survey noted.

* A new question in this year's survey finds that more than two in five workers face a separate deductible, copayment or coinsurance for each hospital admission. Deductibles and copayments average about $200 per admission. Jon Gabel, Kaiser's vice president of health system studies, highlighted the finding as unique. A few years ago, this type of cost sharing "was unheard of," he said at a briefing on the survey. "This has been a very rapid increase in separate deductibles."

* Employers, particularly larger firms, are interested in high-deductible plans (a plan with a deductible of at least $1,000 for single coverage). Five percent of firms overall reported offering a high deductible plan, while 17% of jumbo firms with more than 5,000 employees did. Another eight percent of firms overall said they are likely to add such a plan next year and 16% of jumbo firms say they are.

* Tiered insurance plans, in which members must pay more to use certain physicians and hospitals based on their cost, remain uncommon. Six percent of workers in HMOs, PPOs, and POS plans are in such tiered plans, while an additional 19% are in firms that have considered adopting use of tiered networks in their HMO plans.

In addition to the portion of premium that most workers contribute, most employees also have to pay for a portion of health care services they use:

Deductibles. Nearly four in five workers face a deductible before health care services are covered under their plan. For PPOs-the most common type of plan-in-network deductibles average $275 for single coverage (up form $100 three years ago). Those working for smaller firms have even higher deductibles, averaging $419. PPO deductibles for out-of-network services average $561, up 20% from last year

Copayment/Coinsurance. Virtually all (96%) workers face a copayment or coinsurance for physician office visits, and 86% were in a tiered (two-and three-tiered) prescription drug plan. Sixty-three percent are in a three-tiered plan, up from 55% last year and 41% in 2001.

Out-of-pocket expenses. In addition, 15% of workers were in plans that increased their out-of-pocket liability by excluding spending for certain services (such as deductibles and co-pays for particular prescription drugs) from the calculation of the plans' annual out-of-pocket maximum. Employees in such plans who use these services must pay more out of pocket before their plan steps in to cover all of their remaining health care costs.

Employers also admitted that they lack confidence in any of the approaches to cost-containment currently available. The most commonly identified approach to reigning in costs by employers was disease management, yet fewer than a quarter of firms believe it to be a very effective approach in addressing cost increases (see page 1 figure and Figure 1). Consumer driven health plans were considered very effective by only 14% of employers, higher cost-sharing by 10% of employers and tighter managed care networks were considered very effective in containing costs by six percent of employers. (Figures omitted. Please call 212-244-0360 and identify yourself with code FDN337 to have the figures faxed to you.)