We’re in the midst of a rare slowdown in the growth of health spending. That slowdown just hit the employer health insurance market.
On Wednesday, the Kaiser Family Foundation published its annual survey on the health plans that employers are offering their workers. It’s large and comprehensive and generally regarded as the most reliable measure of what’s happening in the employer market.
The big finding is that the growth in health insurance premiums was only 3 percent between 2013 and 2014. That’s tied for the lowest rate of increase since Kaiser started measuring (this is the 16th year of the survey).
For the past few years, health spending as measured in all kinds of ways has been encouraging. Spending growth in Medicare and Medicaid are down. National health spending is down. But employer health premiums were a little slower to catch on.
The growth in employer premiums has typically been in the double digits every year. That runaway growth has meant problems for workers and the economy. Over the past few decades, employers began dropping health coverage, and premium increases eroded income growth. Some talked about the employer benefit system as a doomed anachronism. The new trend, if it holds, looks a lot more sustainable.
Rate of Growth in Employer Health Premiums Is Slowing
Health insurance premiums are finally starting to look like wage growth and inflation, according to a new study from the Kaiser Family Foundation.
Health economists disagree about the precise mix of factors underlying the slowdown, but most think it has been caused by some combination of a weak economy and shifts in medical practice away from expensive hospitalizations and drugs. Over all, medical spending since 2009 had grown at a per capita rate of about 3 percent. People with employer-provided insurance make up the largest group in the market, so it stands to reason that the slowdown would start pulling down premiums eventually.
“What we’ve really seen over the last 10 years is moderation and stability in the group market,” said Drew Altman, Kaiser’s president. “If I was a corporate C.E.O., I’d have a lot more to worry about now than my health benefits.”
The huge growth in spending before the slowdown didn’t even tell the whole story. Over the same period, employers began shifting more of the costs of health insurance to their workers. The amounts workers were asked to pay for premiums went up, as did the number of plans that included high deductibles. The actual cost of insuring workers was growing even faster than premiums. (The Kaiser report is full of great charts mapping these changes over time.)
This year, with the pressure off, there was a smaller increase in the number of plans that included high deductibles, though the average deductible amount for plans that included the feature did continue to inch up. The number of employers offering coverage also held steady. Health insurance is still very expensive, despite the slowdown: The average family plan costs $16,834 a year, according to the survey.
Like many things about the health spending slowdown, the employer benefits trend is great news wrapped up in a lot of uncertainty. Slow premium growth is good for businesses and workers, but it’s still unclear how long the pattern will hold.