Health Insurance Costs Surge
Underscoring the increasing strains in America’s health-care system, a comprehensive survey shows that workers’ health insurance costs surged 27% this year for individuals and 16% for families, at the same time many employees saw their benefits reduced.
The average premium increase for employers was 13%--the highest since 1990--and marked the second straight year of double-digit inflation, according to the study released Thursday by the Kaiser Family Foundation and the Health Research and Educational Trust.
The increase was driven largely by larger insurance claims stemming from higher prices for hospital services and prescription drugs and consumers’ growing demand for health care.
The survey and separate interviews indicate no letup in premium increases in the foreseeable future. A sobering 78% of the more than 2,000 small and large businesses that responded to the survey said they probably would increase the amount their workers must pay for health coverage next year.
If current trends continue, the study’s authors said, some businesses will stop offering health benefits to their workers, while some low-income wage earners will decline coverage because they will no longer be able to afford their share of the costs.
Whereas the average cost of employer-provided health insurance for a family now is $8,000 a year, for example, by 2005 the cost for such a policy could reach $11,000.
“With increasing health-care costs and a sputtering economy, we will see an increase in the ranks of the uninsured,” Drew Altman, president of the Menlo Park, Calif.-based Kaiser Family Foundation, told a news conference in Washington. In 2000, the U.S. Census Bureau estimated 39 million Americans were without health coverage.
Yet none of the researchers expects a comprehensive political response. Congress has considered but not passed limited health-care measures, such as a Medicare prescription drug benefit and health insurance tax credits. And revenue-strapped states are trimming rather than expanding budgets for public health insurance programs for poor families and children.
“Government regulation is not in the cards,” Altman said.
Although the 13% surge in insurance premiums came as no surprise, experts at the Kaiser Family Foundation and the Health Research and Educational Trust said they were struck by how much workers already were sharing in the pain.
Aside from their sharp increase in premiums, workers saw their deductibles and co-payments increase significantly as well, the survey found. A growing number of employers also took steps to limit prescription drug coverage and eliminate retiree benefits.
“Across virtually every indicator, we found bad news for workers,” Altman said. He said workers should expect more of the same in the future--to pay more and get less for their health coverage--especially if the economy remains sluggish.
About two-thirds of all Americans under 65 are covered by employer-sponsored health insurance. During the booming late 1990s, more small businesses offered health insurance and larger companies provided richer benefits to attract and keep workers. But those trends faded as the economy sputtered and employers’ health insurance costs, driven largely by higher spending for drugs and hospital services, rose steadily, from 5% in 1999 to 8% the next year to 11% in 2001, according to the Kaiser surveys.
The latest annual increase was still less than the 18% jump in 1989, when runaway costs pushed many employers to latch on to managed care and fueled contentious debate over universal insurance. Nonetheless, this year’s 13% increase in employer health insurance premiums is about seven times the rate of overall inflation. The increase was spread uniformly across regions, industries, types of insurance and even size of business.
Faced with increasing health insurance costs, 17% of employers offered fewer benefits this year, the study showed. That “could be the beginning of a trend,” said Diane Rowland, executive vice president of the Kaiser Family Foundation.
And the rate hike figures to get even higher next year, according to insurance executives, benefit consultants and major employer-purchasing groups.
Peter Lee, president of the Pacific Business Group on Health, said his member companies are looking at premium increases generally in the mid to high teens. Some are much higher: The California Public Employees’ Retirement System, or CalPERS, agreed to a 26% increase in HMO premiums for next year.
“Over the long term, employers will be sharing more of the costs than in the past,” said Lee, whose San Francisco-based group negotiates rates for 47 large employers in California that cover 3.5 million people.
Employers and others have blamed the soaring costs on excessive profiteering by big insurers and hospital chains. Although some of those companies have in fact reaped huge profits, the Kaiser study determined that the underlying cause of the current round of spiraling health costs was a rise in medical claims--driven in turn by the aging population, advanced technology and the loosening of controls over managed care that has led to increased use of medical services.
It would be easy to blame hospitals, drug companies and any number of health-care providers, Altman said, “but at the end of the day, I suppose the enemy is us, the American people. We want more medical technology, we want it in our community and we want it now.”
Recent surveys by the Kaiser Family Foundation, which is not related to Kaiser Permanente, have shown declining enrollment in health maintenance organizations as membership has shifted to the less restrictive and more pricey preferred provider organizations, or PPOs. But the new Kaiser health costs survey indicated an uptick in HMO membership over the last year.
Jon Gabel, a vice president of the Health Research and Educational Trust, the Kaiser partner in the study, said it was logical that would happen. As cost-sharing for employees increases, he said, more lower-income people in particular will be inclined to sign up for an HMO, which generally doesn’t come with deductibles and coinsurance, which is the percentage of a hospital bill or doctor’s services that patients must pay themselves.
The average annual premium for employer-sponsored health insurance this year was $3,060 for single coverage, and the typical employee’s share was $454, or about 15%. For family coverage, the yearly premium averaged $7,954, of which the employee picked up $2,084, or 26%, according to the survey.
The Kaiser report is part of a study of health costs that began 14 years ago and is one of the most authoritative studies on employer-based health insurance trends. The latest study surveyed 3,262 randomly selected public and private employers from January to May.
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Times staff writer Vicki Kemper in Washington contributed to this report.
