Press Release
Missy Krasner
Jennifer Morales
EMBARGOED FOR RELEASE UNTIL:
Thursday, October 28, 1999, 9:00 a.m. EDT
NEW ANNUAL SURVEY OF EMPLOYER HEALTH BENEFITS SHOWS
HEALTH INSURANCE PREMIUMS RISING;
COVERAGE AND CHOICE REMAIN ABOUT THE SAME
Cost Increases Hit Small Businesses Especially Hard
Most Employers Favor Hotly Debated Patient Protections
MENLO PARK, CA -- A new annual employer health benefits tracking survey released today by the Kaiser Family Foundation and the Health Research and Educational Trust (HRET) reveals that health insurance premiums rose faster than in previous years -- though still by relatively modest amounts -- but with premium increases hitting small businesses especially hard. Despite the best economy in three decades, there were no real changes in the number offirms offering health insurance coverage and the number of employees who had a choice of more than one health plan. The survey also found that a majority of employers favor hotly debated patient protections, including the right to sue health plans.
The survey found that health insurance premiums increased 4.8% from the Spring of 1998 to Spring of 1999. While still a relatively modest increase compared with the past era of double digit health cost increases, this is the biggest annual increase since 1994 and is more than double the economy-wide inflation rate of 2.1%. Small businesses, defined as firms with 3-199 workers, experienced substantially higher premium increases than larger businesses, defined as firms with 200 or more workers (6.9% compared to 4.1%). The smallest of firms, those with 3-9 workers, reported the highest increase in premiums (9.2%).
Even in this strong economy, the number of uninsured Americans continues to grow -- to 44.3 million, according to recently released Census Bureau figures -- and the availability of employer health coverage shows no signs of increasing. The survey found little change over the last two years in the percentage of employers offering coverage to their workers. While virtually all large employers continue to offer coverage, just 60% of small businesses do so.
At the same time, more employers are taking actions to control the cost of retiree health insurance. Of the 41% of large firms that offered retiree health coverage in 1999, 35% report capping the maximum amount they contribute to a retiree s health plan within the last two years. Just 8% of firms with fewer than 200 workers provide retiree health benefits.
"Premium increases are hitting the smallest of businesses the hardest, most of whom already have a difficult time affording health insurance. These increases will make it even harder for small businesses to provide health insurance for their employees in the future," said Drew Altman, Ph.D., president of the Kaiser Family Foundation.
PREMIUM INCREASES ARE BIGGER FOR SOME AND LESS FOR OTHERS
Premium cost increases depend not only on the size of the employer, but also on the type of funding arrangement and coverage provided. Employers who fund their own health insurance (self-funded plans), which represent about half of all covered workers, had substantially lower premium increases (3.7%) than those firms that purchased health insurance from insurance companies (5.8%). For all employers, Health Maintenance Organizations (HMOs) (5.7%) and conventional (fee-for-service/indemnity) plans (5.6%) had the highest rate of premium increases, followed by Preferred Provider Organizations (PPOs) (4.3%) and Point-of-Service (POS) plans (3.6%).
"For many years, insurance companies have under-priced their health plans to get a bigger share of the market. But after three years of financial losses, health insurers are restoring their profitability through catch-up pricing," says Jon R. Gabel, vice president for Health System Studies, Health Research and Educational Trust. Mr. Gabel directed the Annual Survey of Employer-Sponsored Health Benefits at KPMG Peat Marwick before moving to HRET and is a lead researcher on the project.
PLAN CHOICE AND ENROLLMENT
Choice of Plans: While the extent of plan choices available to employees remains stable -- 65% of covered workers are offered a choice of two or more plans -- it continues to vary substantially by the size of the employer. In 1999, 88% of firms with 5,000 or more workers offered a choice of two or more health plans, while just 10% of firms with 3-199 workers offered a choice of plans.
HMOs (56%) and PPOs (62%) were the most common types of plans that employees could choose from in 1999. Conventional plans were the least frequently offered type of plan, with only 26% of employees being offered them in 1999, down from 52% in 1996.
Plan Enrollment: Employers report PPOs as having the highest rate of enrollment (38%), followed by HMOs (28%), POS plans (25%), and conventional insurance (9%). Since 1988, PPO enrollment among workers has more than tripled (from 11% to 38%) while HMO enrollment has increased more slowly (from 16% to 28%).
"Whether or not you get health insurance on the job, and the kinds of choices you have if you get it, depends on where you work. The disparities between large and small companies are likely to get even worse as small businesses are hit with big premium increases," said Larry Levitt, director of the Changing Health Care Marketplace Project at the Kaiser Family Foundation and a principal analyst on the project.
CHANGES IN BENEFITS OFFERED
In general the level of benefits offered to employees remained relatively stable from 1998 to 1999. However, there were some changes in key areas:
- Pre-Existing Condition Exclusions
: Since the passage of the Health Insurance Portability and Accountability Act (HIPAA) in 1996, the use of pre-existing condition clauses has declined considerably for all types of plans. For example, the percentage of workers in PPO plans with pre-existing condition exclusions dropped from 64% in 1996 to 42% in 1999.
- Reproductive Health Services
: Most employees have coverage for oral contraceptives, though fewer are covered for all forms of reversible contraception. Employees in HMOs (80%) are more likely to have oral contraception coverage than those in conventional (54%), PPO (64% ), or POS (67%) plans. In contrast, 37% of employees with job-based health insurance are covered for abortion services. Employees in large firms are three to four times more likely to be covered for abortion services than employees in small firms.
- Mental Health Services
: Mental health benefits have declined over the last several years. Today only 21% of employees in large firms have mental health benefits with unlimited outpatient visits, compared to 36% in 1991.
EMPLOYER SUPPORT FOR PATIENTS' RIGHTS
Mirroring public views, the survey found that a majority of employers support key provisions in the patients' rights debate. Eighty-five percent (85%) of all employers support the "prudent layperson" definition for emergency care, and 94% support the right for patients to get an independent review when denied coverage. Sixty percent (60%) support the right to sue a health plan, an increase since 1998 when 46% supported the provision. Support for consumer protections is generally higher among small employers, particularly for the right to sue -- support among small firms is 61%, in contrast to the 52% of large firms who oppose the measure.
The survey also revealed that state legislation and voluntary efforts by health plans and employers appear to have improved patient protections in some areas. For example, the percentage of employees enrolled in HMO plans who can designate an OB-GYN as their primary care physician increased from 49% to 67% over the past year. About one-quarter of employees in HMOs are now able to designate a specialist other than an OB-GYN as their primary care physician if they are chronically ill.
CONCERNS OVER COST AND QUALITY
The cost of health care is more worrisome to employers than the quality of care. When asked about their concerns for the following year:
- 72% of all employers said they are "somewhat" or "very" worried that health care costs will increase faster then they can afford, and 65% said they are "somewhat" or "very" worried they will have to switch health plans because of concerns about cost;
- By contrast, only 26% said they are "somewhat" or "very" worried they will have to switch health plans because of concerns about quality of care.
Efforts to accredit health plans and provide data comparing the quality of different plans continue to play a relatively minor role in the selection of plans by employers. Only 18% of covered workers are in firms that cited a plan's accreditation status by the National Committee for Quality Assurance (NCQA) as being "very important" to the health plan selection process; 10% of covered workers are in firms that cited performance measures such as the Health Plan Employer Data and Information Set (HEDIS) as "very important." By contrast, about two-thirds of covered workers are in firms that said the cost of a health plan and the size and reputation of the physician network are "very important" when selecting a health plan.
Copies of the full report are available online at www.kff.org or by calling the Kaiser Family Foundation Publications Request Line at 1-800-656-4533 (ask for document #1538). Multiple copies of the report (three or more) can be ordered through HRET by calling 1-800-242-2626 (ask for catalog number 097501).
Methodology
The 1999 Annual Employer Health Benefits Survey, formerly conducted by KPMG Peat Marwick, is now a joint product of the Kaiser Family Foundation and HRET. The survey was designed and analyzed by researchers at HRET and the Kaiser Family Foundation and administered by National Research LLC. The survey findings are based on a national random sample of 1,939 telephone interviews with human resource and benefit administrators in firms with 3 to 5,000 or more workers from February to June of 1999. An additional 755 firms were interviewed solely to determine whether they offered health insurance coverage to their workers. The sample was drawn from the Dun & Bradstreet list of the nation's private and public employers with three or more workers. The overall response rate was 60%. The margin of error for responses among all employers is +/- 3%. For results based on subsets of respondents, the margin of error is higher.
For the purposes of reporting the data, firm sizes were aggregated into the following subgroups: Small firms were defined as those with 3-199 workers; 25% of all workers covered by employer-sponsored health insurance are in firms of this size. Small firms were split out further into the following categories: 3-9 workers (6% of all covered workers); 10-24 workers (4% of covered workers); 24-49 workers (4% of covered workers); and 50-199 workers (10% of covered workers). Large firms were defined as those with 200 or more workers; 75% of all covered workers are in firms of this size. Large firms were split out further into the following categories: 200-999 workers (19% of covered workers); 1,000-4,999 (17% of covered workers); and, 5,000 or more workers (40% of covered workers). To analyze changes in employer-sponsored health plans, the survey report compares data from KPMG's 1993, 1996 and 1998 Annual Surveys of Employer-Sponsored Health Benefits and from a similar survey conducted by the Health Insurance of Association of America in 1988.
The Kaiser Family Foundation, based in Menlo Park, California, is an independent national health care philanthropy and is not associated with Kaiser Permanente or Kaiser Industries.
The Health Research and Educational Trust is a private, not-for-profit organization involved in research, education, and demonstration programs addressing health management and policy issues. Founded in 1944, HRET, an affiliate of the American Hospital Association, collaborates with health care, government, academic, business, and community organizations across the United States to conduct research and disseminate findings that help shape the future of health care.
