CALIFORNIA HEALTH INSURANCE PREMIUMS JUMPED 15.8% IN 2003, HIGHER THAN THE NATIONAL INCREASE, NEW SURVEY FINDS

Workers’ contribution for family health coverage grew nearly 70% in the past three years

Menlo Park, CA – Health insurance premiums for California workers grew 15.8% in 2003, slightly higher than the national average of 13.9% and nearly seven times the rate of inflation. Nevertheless, California premiums remained slightly less expensive than the national average, according to a new survey released today by the Kaiser Family Foundation and the Health Research and Educational Trust (HRET). Over the past three years, total premiums for family coverage increased by almost 42%. Worker contributions for family coverage increased by nearly 70% (from $1,450 in 2000 to $2,452 in 2003) over the same period.

At $8,504 for a typical family policy, health coverage in California remains slightly less costly than the national average of $9,068, the survey found. Single coverage averaged $3,102 in California in 2003, compared to $3,383 nationally. California’s lower premium rates are in part due to the high level of Health Maintenance Organization enrollment, with about 52% of workers were enrolled in HMOs in 2003, compared to 24% nationally.

“For the first time since we have been conducting this survey since 1999, health insurance premiums in California rose significantly faster than in the rest of the nation. The last three years of double-digit premium increases in California have been particularly hard for working families, who have seen their contributions for family coverage increase by almost 70% over this period,” said Drew Altman, Ph.D., president and CEO of the Kaiser Family Foundation.

The California Employer Health Benefits Survey of 864 private California firms is based on a national employer survey conducted annually by the Kaiser Family Foundation and HRET. This survey and the national survey, which was released in September 2003, are available at the Foundation's web site. The California survey findings will be discussed at a briefing, “Employer-Sponsored Health Insurance in California: Coping with Rising Costs and Implications for SB2,” sponsored by the Kaiser Foundation and held with the University of California-Berkeley Center for Health and Public Policy Studies in Sacramento on March 17. (All reporters are invited to attend; for more information, please call Rob Graham at 650-854-9400.) SB2 is the new law in California that would establish a system of mandatory employer-sponsored coverage.

While employers are not dropping coverage – 70% of California employers offered coverage in 2003, a similar percentage to 2002 – employees in California are contributing significantly more for coverage, particularly for family coverage. On average, workers in California contributed $2,452 for family coverage and $418 annually for single coverage in 2003. Compared to 2002 levels, worker contributions grew nearly 35% for family coverage and by about 22% for single coverage. Workers’ average share of the premium costs for family coverage in 2003 grew to 30%.

Half of all large firms (51%) reported that they were very likely to increase the amount employees pay for insurance in 2004, with smaller percentages saying that they were very likely to raise deductibles (14%) and the amount employees pay for prescription drugs (21%). Employers also are indicating coniderable interest in health plans with high deductibles (e.g., plans with at least a $1,000 deductible), with 15% of employers of all sizes indicating that they are very likely to offer this type of a health plan.

“We anticipate that a growing share of should expect a considerable number of employers will be to experimenting with consumer-driven product designs over the next year or two,” said Jon Gabel, vice president for Health Systems Studies at the Health Research and Educational Trust and one of the survey directors.

Benefits and Cost Sharing

Benefit levels (other than cost-sharing) did not change for most (84%) covered workers in 2003; 10% of covered workers were in plans that reduced benefits and 6% of covered workers were in plans that increased benefit levels.

Among large firms (with 200 or more workers) in 2003, 68% reported increasing the amount workers pay for coverage, 46% increased the amount workers pay for prescription drugs, 32% increased the amount workers pay for deductibles, and 42% of large firms increased the amount employees pay for office visit copayments and coinsurance.

HMO cost-sharing also rose in 2003, with 16% of HMO enrollees paying a $20 copayment for a physician visit, up from 6% in 2002. The most common HMO copayment for a physician visit in California is $10.

In an attempt to control prescription drug costs, California companies are increasingly using tiered cost sharing formulas for prescription drug, with 41% of companies reporting such a structure (up from 35% in 2002), but this is still lower than the national average of 63%. While average payments for drugs in each of the three tiers (generic, preferred, and non-preferred) increased in 2003, the average copayment for a non-preferred drug ($22) remained lower than the national average ($29).

Health Plan Enrollment, Choice and Insurance Arrangements

Employees in California have much greater choice of health plans than workers nationwide. The survey found that 85% of large employers (200 or more workers) in California offered more than one health plan option in 2003, compared to 57% of large employers nationally. Enrollment in HMOs (52%) and preferred provider organizations (29%) in California vary from the rest of the country (compared to 24% and 54% nationally).

The Kaiser Family Foundation is a non-profit, private operating foundation dedicated to providing information and analysis on health care issues to policymakers, the media, the health care community, and the general public. The Foundation is not associated with Kaiser Permanente or Kaiser Industries.

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 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.

Methodology

The California Employer Health Benefits Survey is a joint product of the Kaiser Family Foundation and Health Research and Educational Trust (HRET). The survey was designed and analyzed by researchers at the Kaiser Family Foundation and HRET, and administered by National Research LLC (NR). The findings are based on a random sample of 864 interviews with employee benefit managers in private firms in California. NR conducted interviews from May to August 2003. As with prior years, the sample of firms was drawn from the Dun & Bradstreet list of private employers with three or more workers. The margin of error for responses among all employers is +/- 3.5%. Some exhibits do not sum to 100% due to rounding effects.

The survey is based on a national employer survey conducted annually by the Kaiser Family Foundation and HRET. The 2003 U.S. results in this chartpack are based on that survey (pub #3369), and are available on the Foundation’s web site. Prior to 1999, the national survey was conducted by KPMG Peat Marwick LLP (now Bearing Point). A similar employer survey was also conducted in 1999 in California, in conjunction with the Center for Health and Public Policy Studies at the University of California, Berkeley.

The survey asked questions about the following types of health plans: Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO), and Point-of-Service (POS) plans. Conventional (fee-for-service) plans are generally excluded from the plan type analyses because they comprise such a small share of the California market.

An important note about the methodology: In prior years, the sample of employers was post stratified using frequency distributions from Dun & Bradstreet. Concerns about the volatility of counts in recent years led Kaiser/HRET to use the Statistics of U.S. Businesses conducted by the U.S. Census as the basis for the post-stratification adjustment in 2003. Due to this change, Kaiser/HRET recalculated the weights for the survey years 2000-2002 and modified estimates published in the chartpack where appropriate. This change has little impact on worker-based estimates, but the impact on estimates expressed as a percentage of employers (e.g., the percent of firms offering retiree health coverage), may be significant. Please note, therefore, that the survey data published in this chartpack may vary slightly from previously published reports and chartpacks.