Once a Leader in Low-Cost HMOs, California Now Looks Like Rest of the Nation

Californians, who for many years benefited from some of the lowest HMO premiums in the United States, now are paying about the same rates as the rest of the country, according to a new employer survey released today by the California HealthCare Foundation (CHCF).

Historically, California’s large multi-specialty medical groups have been able to provide services to HMO members at a lower cost than the national average. However, the constant upward pressure on premiums has eroded the California price advantage for HMOs.

“When it comes to HMO premiums, at least, California is now no different from the rest of country,” said Jill Yegian, Ph.D., director of the health insurance program at CHCF.

The annual survey, conducted by The Center for Studying Health System Change, highlights statistics and trends in California and provides comparisons both within the state and nationally. The findings are based on a random sample of 802 interviews conducted with employee benefit managers in private firms in California from April to July 2006.

Health insurance premiums rose 8.7% in 2006 – more than twice the rate of increase for general inflation in California (4.2%). Twenty-five percent of workers in small firms (3 to 199 workers) experienced premium increases greater than 15%.

Looking to offset the cost of premiums, 41% of large employers (200 or more workers) in California reported that they were “very likely” to increase the amount employees pay for health insurance premiums in 2007, and 28% “somewhat likely” to ask employees to pay more for coverage.

Other survey findings include:

  • California workers paid $547 annually for single coverage and $2,824 for family coverage. Workers in small firms paid significantly more out of pocket for family coverage than did those in large firms.
  • Sixteen percent of California employers offered a high-deductible health plan in 2006; 6% offered a health savings account-eligible high-deductible health plan.
  • In spite of increasing concern about the affordability of coverage, only 6% of California employees worked for firms that used employee wage level as a basis for varying worker premium contributions.
  • Overall, 58% of California firms – and 91% of large firms – offered dental coverage in 2006.

Methodology and Sponsorship

The California Employer Health Benefits Survey is a joint product of the California HealthCare Foundation and The Center for Studying Health System Change (HSC). The survey was designed and analyzed by researchers at HSC and administered by the National Research LLC (NR).

This California survey is based on a national employer survey conducted annually by the Kaiser Family Foundation and the Health Research and Educational Trust. National results in this study are based on the U.S. survey, which is available at www.kff.org. Findings are based on a random sample of 802 interviews with employee benefit managers in private firms in California. NR conducted interviews from April to July 2006. As with prior years, the sample of firms was drawn from the Dun and Bradstreet list of private employers with three or more workers. The margin of error for responses among all employers is +/- 3.4%; for responses among employers with 3 to 199 workers is +/- 4.5%; and among employers with 200 or more workers is +/- 5.5%. Some exhibits do not sum to 100% due to rounding effects.

About The Center for Studying Health System Change

The Center for Studying Health System Change (HSC) is a nonpartisan policy research organization located in Washington, D.C. HSC designs and conducts studies focused on the U.S. health care system to inform the thinking and decisions of policymakers in government and private industry. Visit www.hschange.org for more information.

About the California Health Care Foundation

The California Health Care Foundation is dedicated to advancing meaningful, measurable improvements in the way the health care delivery system provides care to the people of California, particularly those with low incomes and those whose needs are not well served by the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford.