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Health care premium hikes remain muted

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Employer adoption of high-deductible health plans continue to help keep the lid on premium increases, but experts question how much longer the multiyear run of modest increases will continue.

In 2015, group health plan premiums for family coverage rose 4.2% to an average $17,545 per employee, according to a Kaiser Family Foundation survey of nearly 2,000 employers released last week.

That compares with a 3% increase for family coverage in 2014 and 3.8% in 2013.

Similarly, this year's 3.8% average increase for single coverage, which rose to $6,251, compares with a 2.4% rise in 2014 and 4.8% in 2013.

The survey results “continue a remarkable 10-year run in moderate increases in premiums and health care costs,” Kaiser Family Foundation President and CEO Drew Altman said during a briefing.

Indeed, health plan premium increases for family coverage have averaged 5% annually over the past decade, less than half the 11% average annual increase from 1999 to 2005.

A key factor limiting the increases has been employers' shifting more costs to employees in the form of higher deductibles, benefit experts say.

For example, this year's average deductible of $1,318 for employees with single coverage is up more than 40% since 2010, according to the Kaiser survey.

Similarly, 24% of employees now are covered by high-deductible plans linked to health savings accounts or health reimbursement arrangements, triple the 8% covered in 2009 by the health plans often known as consumer-driven health plans.

“There has been aggressive adoption of CDHPs across the board,” said Tim Nimmer, chief health care actuary at Aon Hewitt in Denver.

“Employees, through the higher deductibles, at first are shocked by what things cost, but, over time, employees learn how to better use health care services to mitigate their out-of-pocket costs,” said Michael Thompson, a principal at Pricewaterhouse-Coopers L.L.P. in New York.

Employers also have been adding telemedicine programs in which employees can talk on the phone to medical professionals, rather than seeking care through more expensive office visits or trips to hospital emergency rooms, Mr. Thompson said.

Another factor holding down cost increases has been employer adoption of wellness programs, such as health risk assessments and biometric screenings to spot health problems before they become expensive-to-treat medical problems.

For example, 81% of employers with at least 200 employees offer wellness programs to help workers stop smoking, lose weight or make other lifestyle changes, according to the Kaiser survey.

In the School District of Palm Beach County, health plan costs are expected to rise only about 2% this year due in large part to its comprehensive wellness program, said Dianne Howard, the district's director of risk management and benefits in West Palm Beach, Florida.

“We attribute the lower trend to all our various programs, from our outcomes-based wellness program to our diabetes interventions with a plan that has lower copays for those members who follow the recommended guidelines in treatment protocol,” Ms. Howard said.

Still, experts question how long the run of modest annual premium increases can continue and cite expensive prescription drugs as a key issue.

A survey earlier this year by prescription benefits manager Express Scripts Inc. found that 500,000 U.S. patients had medication costs in excess of $50,000 in 2014, a 63% jump from 2013, as doctors prescribed expensive specialty drugs for diseases such as cancer and hepatitis.

“Higher deductibles and copayments do not put even a dent in specialty drug costs,” said Dave Ratcliffe, a principal at Buck Consultants at Xerox in Washington.

In addition, some employers say they are seeing a rash of high-cost claims.

“Our actuaries are projecting an 11% increase for our self-insured medical plans. This is being driven by an ongoing trend of more high claims under the plan. This trend started in the fall of 2013 and has continued,” said Bonnie Sawdey, vice president of human resources at Crawford & Co. in Atlanta.

“There isn't a single cause of our high claims. We've had a variety of diagnoses associated with these claims. There have been several instances of cancer, a premature baby, organ transplant and a serious accident,” Ms. Sawdey said.

In addition, some experts say CDHPs may cause employees to delay getting treatment.

With higher cost sharing, “there is a risk of employees deferring care,” Buck Consultants' Mr. Ratcliffe said. That could mean lower plan costs in the short run, but much higher costs if untreated medical problems become serious and costly to treat, he said.

Others, though, say employees in HDHPs are seeking preventive services.

“This year, 76% of employees participating in our high-deductible health plans have had a preventive care visit,” up from 36% in 2013, before Crawford moved its employees to CDHPs, Ms. Sawdey said.