Health Insurance Rates Jump 4.8% Nationally

The price of health insurance premiums--which has increased by double-digits for two years in a row in California--has jumped ahead nationally at more than twice the rate of general inflation, according to a survey of employers.

The 4.8% average hike nationwide for 1999, though far short of the double-digit increases common in the 1980s, was the largest in five years.

The survey by the Kaiser Family Foundation and the nonprofit Health Research & Education Trust found significantly higher premium increases for small employers: 7% for companies with fewer than 200 workers and 9% increases for the smallest firms--those with nine workers or fewer.

The increases come after years of minor or no hikes, as managed-care companies competed intensely for members, particularly in California, and kept premium prices down. Last year, many health maintenance organizations reported declines in profits and even losses in some cases, blaming them on flat premiums.

Many plans began raising rates last year--in California by an average of 10% annually for both 1999 and 2000. Several companies that had been struggling posted improved earnings.

There have been some signs of a growing backlash to higher premiums among major corporations that are the biggest purchasers of insurance. In California, more than a third of the businesses that belong to a key insurance-buying alliance say they will drop or freeze enrollment next year in health plans that do not offer improved care and service along with the higher prices.

Premium costs are rising most swiftly in indemnity, or traditional, insurance plans and preferred provider plans, which typically allow patients the greatest choice of doctors and hospitals and put the fewest limits on their access to services, according to the survey.

In HMOs, which generally put tighter limits on access to health services, costs are rising at slower rates.

The long-standing trend away from indemnity coverage and into managed care is continuing, the survey found. The number of consumers in indemnity insurance plans is plummeting--just 9% were in such plans in 1999 compared with 73% in 1988. In the same period, HMO membership grew gradually to a high of 31% in 1996, but has since dropped to 28%.

“In the last couple of years people were able to shift out of HMOs and into PPOs because we had unprecedented price stability and a strong economy,” said Jon Gabel, vice president of the Health Research & Education Trust.

Gabel said he expected that prices would continue to rise next year and that the number of consumers in traditional indemnity plans would continue to drop.

Despite the robust economy, the survey detected no increase in the number of employers offering health insurance to their workers.

“The fact that we haven’t really seen any change in the percentage of employers offering insurance even in an all-time boom economy is reason to worry,” said Drew Altman, president of the Kaiser Family Foundation.

The study for the first time surveyed firms about patients’ rights and coverage of abortion. Surprisingly, the majority of companies that are major purchasers of insurance said they supported most patients’ rights, including the right to recover significant damages from HMOs in court.

Nearly all companies said they supported such patient protections as the right to use the closest emergency room and the right to appeal a health plan’s decision to deny coverage to an independent panel. The right to recover substantial damages for injury from a health plan got less support than the other protections, but still 60% of firms said they thought patients should have the right to recover damages in court.

Large employers and health plans, along with lobbyists for national organizations that represent small businesses, bristled at the study, noting that the surveyors had not interviewed the chief executives of companies, who set policy, and so had not reflected employers’ opposition to any right to sue. The study’s authors interviewed human resources and benefits administrators.

The study was based on 1,939 telephone interviews of firms with three to 5,000 or more workers. An additional 755 firms were interviewed solely to determine whether they offered health insurance coverage to their workers.

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Times staff writer Sharon Bernstein contributed to this report.