The Washington Post - September 9, 2004

Health Insurance Premiums See Double-Digit Increase

By Albert B. Crenshaw
 Washington Post Staff Writer
 Thursday, September 9, 2004; 9:31 AM

 Employer-sponsored health insurance premiums rose 11.2 percent this year, registering the fourth consecutive double-digit annual increase and pushing the cost of family coverage under the most common type of plan past $10,000, according to a new nationwide survey.

While this year's rise was down slightly from the 13.9 percent of last year, it is still "five times the rate of growth in wages [and of] inflation," said Drew E. Altman, president of the Kaiser Family Foundation, which along with the Health Research and Educational Trust, released the survey today.

 The unceasing rise will depress wages, affect hiring decisions and encourage outsourcing, he said. The number of uninsured will continue to rise, while the cost shouldered by workers lucky enough to have insurance will also climb, putting greater pressure on family budgets, Altman said.

 The percentage of all workers who have health insurance through their employers continues to slip, with 5 million fewer jobs offering health insurance now than in 2001, Kaiser said. Although this year's decline was slight -- to 61 percent from 62 percent in 2003 -- the drop from the peak of 65 percent in 2001 is "significant," Kaiser said. The share of workers at small firms -- those with three to 199 workers -- getting health insurance declined to 50 percent this year from 58 percent in 2001.

In contrast to the hopeful outlook of a few years ago, most experts see no prospect of a global solution that will bring costs under control, Altman added. Where once it was thought that managed care or a plan proposed by the Clinton administration plan might rein in medical costs in a major way, proposals offered today, such as disease management or consumer-driven health care, appear likely to have a minor impact, he said.

"I have no answer," Altman said. We may be able to clip a percentage point or two off the growth rate here and there, but "we should be prepared to pay more."

The Kaiser survey's findings are consistent with those of private benefits consultants, which have been surveying employers as well, and parallel the fears surrounding public programs such as Medicare.

Overall, the average cost of health care coverage for a family is $9,950 ($3,695 for a single worker) this year, the survey found. Health maintenance organizations (HMOs) are the least expensive type of plan at $9,504 a year for family coverage and $3,458 for single coverage. Preferred provider organizations (PPOs), which are the most common type of plan and cover 55 percent of workers who have health care, are the most expensive. PPO family premiums average $10,217, while single coverage is $3,808.

Among all plans, workers on average pay $2,661 of the $9,950 annual cost for family coverage and $558 of the $3,695. In HMOs, workers pay $2,674 for family coverage and $552 for single, on average. In PPOs, the figures are $2,691 and $573.

The percentage of premiums borne by workers has remained more or less constant since 1988 at just under 30 percent, the survey found, though Altman pointed out that this is a constant share of a steadily rising dollar amount.

 The survey found employers only mildly optimistic about new steps to control costs. Some 15 percent said they think disease management -- the treating of long-term illnesses on an integrated, coordinated basis, rather than dealing with each problem as it arises -- would be "very effective" in cutting costs. Larger employers with the resources to carry out disease management were the most optimistic about it.

Eleven percent viewed consumer-driven health plans -- such as health savings accounts, which combine a high deductible with a tax-free investment account --as potentially very effective. The savings accounts are touted by some experts as employing market forces to hold down health care spending because the consumer gets to keep any savings. However, they are new and their impact is unclear.