Employer Health Benefits KFF/HRET 2008 Survey Health Benefits in 2008: Premiums Increase Modestly as CDHP Grows and Deductibles Rise Sharply Jon Gabel National Opinion Research Center At The University of Chicago

Employer Health Benefits KFF/HRET 2008 Survey Percentage Decline in the Adjusted Price of Major Investor-Owned Health Insurers, October, February, 2009

Employer Health Benefits KFF/HRET 2008 Survey Presentation Objectives  To document the state of employer-based health benefits, 2008, in the USA and California  To examine the historical experience of employer-based insurance during an economic downturn.  To review recent CBO analysis of potential avenues of cost savings

Employer Health Benefits KFF/HRET 2008 Survey Telephone survey of 1,927 randomly selected public and private employers National Research conducts interviews with employee benefit managers from Jan to May 2008 Response rate of 48 percent in 2008 Survey conducted by HIAA and KPMG Use of statistical weights Employer-based statistics Employee-based statistics KFF/HRET Health Benefits Survey

Employer Health Benefits KFF/HRET 2008 Survey California Health Care Foundation (CHCF)/NORC California Employer Health Benefits Survey Survey of 796 randomly selected private firms with three or more workers. Sampling error of 3.5 percent Questions similar but not identical to KFF/HRET survey. KFF sponsored survey from CHCF from

Employer Health Benefits KFF/HRET 2008 Survey Increases in Health Insurance Premiums Compared to Other Indicators, * Estimate is statistically different from the previous year shown at p<0.05. No statistical tests were conducted for years prior to † Estimate is statistically different from the previous year shown at p<0.1. No statistical tests were conducted for years prior to Note: Data on premium increases reflect the cost of health insurance premiums for a family of four. Source: KFF/HRET Survey of Employer-Sponsored Health Benefits, ; KPMG Survey of Employer-Sponsored Health Benefits, 1993, 1996; The Health Insurance Association of America (HIAA), 1988, 1989, 1990; Bureau of Labor Statistics, Consumer Price Index (U.S. City Average of Annual Inflation (April to April), ; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April), %†

Employer Health Benefits KFF/HRET 2008 Survey Increases in California Health Insurance Premiums Compared to Overall Inflation, Health insurance premiums in California grew by 8.3% in 2008, statistically unchanged in recent years. Premium increases in California in 2008 were more than twice the California inflation rate of 3.0% Sources: CHCF/NORC California Employer Health Benefits Survey: ; CHCF/HSC California Employer Health Benefits Survey: ; CHCF/HRET California Employer Health Benefits Survey: 2004; Kaiser/HRET California Employer Health Benefits Survey: ; California Division of Labor Statistics and Research, Consumer Price Index, California Average of Annual Inflation (April – April) 1999–2008. Chart #8 * Estimates are statistically different from the previous year shown.

Employer Health Benefits KFF/HRET 2008 Survey Cumulative Changes in Health Insurance Premiums, Overall Inflation, and Workers’ Earnings Source: KFF/HRET Survey of Employer-Sponsored Health Benefits, ; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), ; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April),

Employer Health Benefits KFF/HRET 2008 Survey Average Monthly Premiums, by Plan Type, 2008, USA and California Chart #13 Source: CHCF/NORC California Employer Health Benefits Survey: 2008; Kaiser/HRET Employer Health Benefits Survey: 2008 * Estimates are statistically different between California and US. Premiums in California were generally comparable to premiums nationally. California PPOs were more costly and HMOs slightly less costly than the nation. SingleFamily

Employer Health Benefits KFF/HRET 2008 Survey Health Plan Enrollments for Covered Workers, by Plan Type, The percentage of covered workers enrolled in HMOs in California was considerably higher than nationally. Conversely, enrollment in PPOs in 2008 remained far lower in California than nationally. Enrollment in high-deductible plans with a savings option among California workers has remained the same from 4 percent in 2007 to 4 percent in 2008, whereas it increased from 5 percent to 8 percent nationally. California U.S. Chart #37 Sources: CHCF/NORC California Employer Health Benefits Survey: ; CHCF/HSC California Employer Health Benefits Survey: ; CHCF/HRET California Employer Health Benefits Survey: 2004; Kaiser/HRET California Employer Health Benefits Survey: ; Kaiser/HRET Employer Health Benefits Survey: Note: Conventional plan enrollment in California in 2001, 2005 and 2007 is less than 1%. Due to the addition of HDHP in 2006, no test was conducted comparing 2006 with * Distribution is statistically different from previous year shown.

Employer Health Benefits KFF/HRET 2008 Survey Average Monthly Worker Contribution, * Estimate is statistically different from the previous year shown at p<.05. No statistical tests were conducted for years prior to Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, ; Health Insurance Association of America (HIAA), Percentage of Premium Paid by Covered Workers, * Estimate is statistically different from the previous year shown at p<.05. No statistical tests were conducted for years prior to Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, ; Health Insurance Association of America (HIAA), 1988.

Employer Health Benefits KFF/HRET 2008 Survey Increases in Overall Deductibles (All Plans), in Dollars, Includes plans with and without deductibles Source: Kaiser/HRET Employer-Sponsored Health Benefits Survey,

Employer Health Benefits KFF/HRET 2008 Survey *Distribution is statistically different from distribution for the previous year shown (p<.05). ‡ No statistical tests are conducted between 2003 and 2004 or between 2006 and 2007 due to the addition of a new category. Note: Fourth-tier drug cost sharing information was not obtained prior to Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, Distribution of Covered Workers Facing Different Cost-Sharing Formulas for Prescription Drug Benefits, ‡ ‡

Employer Health Benefits KFF/HRET 2008 Survey Percentage of Firms Offering Health Benefits, *Tests found no statistical differences from estimate for the previous year shown (p<.05). Note: Estimates presented in this exhibit are based on the sample of both firms that completed the entire survey and those that answered just one question about whether they offer health benefits. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits,

Employer Health Benefits KFF/HRET 2008 Survey Percentage of Workers Covered by Their Employer’s Health Benefits, in Firms Both Offering and Not Offering Health Benefits, by Firm Size, # Year-to-year estimates are not significantly different at p<.05. However, there is a significant change between 2000 and 2005 for All Firms and All Small Firms at p<.05. Source: KFF/HRET Survey of Employer-Sponsored Health Benefits, 1999–2008.

Employer Health Benefits KFF/HRET 2008 Survey * Estimate is statistically different from estimate for All Non-HDHP/SO Plans (p<.05). ‡ When those firms that do not contribute to the HSA (28% for single and family coverage) are excluded from the calculation, the average firm contribution to the HSA for covered workers is $1,139 for single coverage and $2,067 for family coverage. For HDHP/HRAs, we refer to the amount that the employer commits to make available to an HRA as a contribution for ease of discussion. HRAs are notional accounts, and employers are not required to actually transfer funds until an employee incurs expenses. Thus, employers may not expend the entire amount that they commit to make available to their employees through an HRA. Therefore, the employer contribution amounts to HRAs that we capture in the survey may exceed the amount that employers will actually spend. § In order to compare spending for HDHP/SOs to all other plans that are not HDHP/SOs, we created composite variables excluding HDHP/SO data. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, Average Annual Premiums and Contributions to Savings Accounts For Covered Workers in HDHP/HRAs or HSA-Qualified HDHPs, Compared to All Non-HDHP/SO Plans, 2008 HDHP/HRA HSA-Qualified HDHP Non-HDHP/SO Plans § SingleFamilySingleFamilySingleFamily Total Annual Premium$4,468$11,571*$3,527*$9,101*$4,769$12,892 Worker Contribution to Premium$533*$3,455$420*$2,332*$742$3,397 Firm Contribution to Premium$3,935$8,117$3,107*$6,769*$4,027$9,495 Annual Firm Contribution to the HRA or HSA ‡ $1,249$2,073$838$1,522NA Total Annual Firm Contribution (Firm Share of Premium Plus Firm Contribution to HRA or HSA) $5,184*$10,190$3,945$8,291*$4,027$9,495 Total Annual Cost (Total Premium Plus Firm Contribution to HRA or HSA, if Applicable) $5,717*$13,645$4,365*$10,623*$4,769$12,892

Employer Health Benefits KFF/HRET 2008 Survey Distribution of Firms’ Opinions on the Effectiveness of the Following Cost Containment Strategies, 2007 *Distributions are statistically different between All Small Firms and All Large Firms within category (p<.05). Note: Distributions are among all firms both offering and not offering health benefits. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, Tighter Managed Care Networks* Higher Employee Cost Sharing* Consumer-Driven Health Plans Disease Management Programs*

Employer Health Benefits KFF/HRET 2008 Survey Employee Cost Sharing Grows Dramatically During Economic Downturn of

Employer Health Benefits KFF/HRET 2008 Survey Congressional Budget Office’s Perspective on Cost Savings Disease Management -- “Evidence about cost-reduction in the private sector have been inconclusive, and programs in the Medicare population have not shown cost reductions either.” Comparative Effectiveness – “It would take several years before new research on comparative effectiveness would reduce health care spending substantially.” Preventive Services – (Quoting study by Tufts) “Only 20 percent of preventive services that have been accessed yielded savings.” Malpractice – “CBO has not found consistent evidence that changes in the malpractice environment would have a measurable impact on health care spending.”

Employer Health Benefits KFF/HRET 2008 Survey Malpractice Claims, 2003 Did a Severe Injury Occur Was the Injury Due to Negligence Percent of Medical Encounters Thousand of Malpractice Claims Filed %of Encounters Resulting in a Malpractice Claim NoNA98.6% YesNo0,9% Yes 0.5% AllSometimes100%57.15 D.M. Stoddart, Health Affairs, 2007

Employer Health Benefits KFF/HRET 2008 Survey Summary Premium increases (5.0 percent) moderated to the lowest level since 1999 – but this is due to changed method of calculation. – But nearly twice the rate of increase in wages Since 2000, premiums have risen 103 percent compared to 21 percent overall inflation and 25 percent increase in workers earnings. CDHP enrollment grew strongly among small firms. Cost sharing increases were comparatively strong over the past few years. Economic downturns lead to lagged increase in cost-sharing and reduction in coverage.