The good news yesterday was supposed to be that even though consumers are spending more for health insurance, those costs are rising more slowly than in prior years. According to Kaiser’s 2008 Employer Health Benefits survey, premiums rose an average 5% in 2008, which is close to last year’s figure and still digestible compared to the more than 10% increases seen a few years ago.

But plenty of more worrying facts emerged during the press conference yesterday, here are the two biggest ones:

• Many more employers may drop coverage, or significantly reduce their contribution, next year.
• Few employers are convinced that anything we are doing now is saving money.

Why will coverage erode? “The majority of employers make decisions about health care coverage in September and October,” explained Drew Altman, president and CEO of the Kaiser Family Foundation. “When they were making those decision last year, the economy still wasn’t doing badly.” The only reason coverage still looks as good as it does for American workers is “The time lag,” Altman said. “I expect next year to see a decline in coverage, both in terms of number of employers offering coverage and how much coverage they do offer.”

It’s not surprising that more employers are trying to shrug off the health care benefits yoke. Costs keep rising. And nothing we do seems to help very much. Kaiser asked the almost 3,000 employers surveyed how the following cost containment strategies worked: tighter managed care networks, consumer-driven health plans, higher employee cost sharing, and disease management programs.

The best rating any of these got was disease management programs, which 28% of all large employers thought were “very effective.” That’s dismal, but it’s not surprising either. Asked about wellness programs in particular, Altman pointed out that “These do seem to improve health but don’t appear to help reduce costs.” Most employers, he said, now view these programs as good for “productivity” but not for health care cost-containment.

All this combines to deliver a shriveling employer-based health care system, especially among smaller firms:

• During the last nine years, premiums have more than doubled, while wages increased only 34% and general inflation rose 29%.
• More than one in three (35%) of covered workers in small businesses (3-199 workers) now have a deductible of at least $1,000.
• Virtually all large firms still offer health insurance, but only 62% of smaller firms do, and only 49% of the very smallest (3-9 workers) do. Altman described coverage at small firms as “increasingly like what you’d find on the individual market.”
• Workers in small businesses also pay about $1000 more for family coverage than those at larger firms.
• Over the last nine years, the number of large firms offering retiree health benefits has dropped from 66% to 31%.
• Asked about next year, 14% of firms said they were “very likely” to raise workers’ premium contributions then, and 12% said they were “very likely” to raise deductibles.

In short, most consumers will be paying more for health care as time goes on. Workers at small firms will be especially pressed. It also looks like there is finally enough activity around consumer-driven health care to start asking how it’s performing. At small firms, 13% of employees are now enrolled in plans with high deductibles and Health Savings Accounts (HSAs) or Health Reimbursement Arrangements (HRAs). The number of employees in large firms enrolled in such plans has stayed constant over the last two years, and is about 5%.

In the Kaiser survey, employers did not seem too optimistic about the consumer-driven plans. Only about 15% of small employers thought the plans were very effective at reducing costs. Most of them rated the plans as “somewhat” or “not very” effective. Altman added that “The consensus of economists is that higher copays and higher deductibles lead to fewer uses of health care and less spending, but, that is a blunt instrument that cuts out both effective and ineffective care.”

Finally, there are probably much bigger premium rises in store, according to Jon Gabel, one of the survey authors and a senior fellow a the National Opinion Research Center (NORC) at the University of Chicago. “A lot of the health insurance companies underestimated costs, and the premiums may be too low,” he said. That’s why Wall Street has been punishing them.

Note: The full survey is available online at www.kff.org/insurance/7790/index.cfm. The Health Affairs article based on the survey is also available online to subscribers at www.healthaffairs.org or via the free link at the Kaiser Web site above.