Sept. 15, 2009 -- The cost of job-based health insurance continued to take a bigger bite from workers and employers this year, rising 5% for family coverage.
This increase in total premiums, moderate by recent historical trends, outstripped the 0.7% drop in general inflation and an average 3.1% hike in wages, according to an employer survey released Tuesday.
Family premiums increased to $13,375 annually, with employees on average contributing $3,515 of that cost, the survey shows. Along with paying higher premiums, workers generally also face higher deductibles and co-pays for services as employers shift more costs to employees.
“When health care costs continue to rise so much faster than overall inflation in a bad recession, workers and employers really feel the pain,’’ says Drew Altman, president and CEO of the Kaiser Family Foundation, which released the survey along with the Health Research & Educational Trust (HRET).
The employer survey, in its 11th year, calculated a 131% increase in premiums for family coverage over the past 10 years, more than three times the rise in worker wages and more than four times the inflation rate. Over that time, workers’ contributions to premiums rose 128%.
Health cost increases have hit workers hard as they juggle other household bills during a recession, Altman said. And he added, “Employers always scream the loudest [about health care costs] when the economy is bad.’’
Maulik Joshi, president of HRET, says the survey findings "demonstrate the need for comprehensive, meaningful reform.’’
Controlling the rise in health costs is one aim of health reform proponents, though the various bills don’t provide many specifics on how to accomplish that goal.
Employees Feel the Pinch
Still, the survey results show how people with insurance are hurt by years of climbing health costs, says Donald Taylor, assistant professor of public policy at Duke University.
“Most of people’s wage increases are being eaten up by health insurance increases,’’ Taylor says. “If you have good health insurance, you’re still being negatively impacted by the status quo.’’
Those with insurance also pay a ‘’hidden tax’’ of covering medical costs incurred by the uninsured, Taylor notes.
And Kaiser’s Altman said that if health premiums continue to rise by the recent average growth rate of 6.1%, the cost of family coverage would reach $24,180 by 2019.
The employer survey, conducted between January and May, drew complete responses from 2,054 firms. One of those firms, Hepner Air Filter Service of Cleveland, said increases in its health costs have averaged about 12% in recent years. Eric Hepner, the firm’s owner, says he does not charge his 15 employees any premium for their health insurance.
But when the union contract comes up for negotiation later this year, Hepner says, health care will be a prime topic.
“I don’t know if I can absorb any more increases,’’ Hepner says.
If the firm’s health insurance cost rises again, he says, workers may have to start paying a portion of the premium, or the benefit plan may be changed to reduce spending.
The survey shows that 60% of firms offer health coverage to workers. Yet just 46% of employers with three to nine workers provided benefits.
Small Firms Suffering
Smaller firms have a higher share of workers in high-deductible plans, the survey reports. It shows that 40% of covered workers in firms of fewer than 200 employees had deductibles of at least $1,000 for single coverage, up from just 16% in 2006. Just 13% of employees in large firms this year had a deductible of that size.
Small employers generally lack the bargaining power of large companies in negotiating affordable rates with health insurers.
Many small firms have seen double-digit percentage increases in health costs, says Amanda Austin, director of federal public policy for the National Federation of Independent Business. Smaller companies often are forced to raise deductibles to keep insurance affordable, she says.
The cost of insurance is a top priority for her organization’s members as the health reform debate continues, Austin says. “We can’t just walk away from this problem,’’ she said. “It’s on an unsustainable path.’’
Costs Rise, Benefits Reduce
Companies of all sizes continued to pare benefits this year, the survey shows. Among firms that provide health insurance, 21% reduced the scope of benefits or increased worker cost-sharing due to the downturn, and 15% raised the worker’s share of the premium.
Next year will put even more financial pressure on workers, the survey suggests. It shows that 42% of employers are very likely or somewhat likely to increase the amount workers pay for insurance next year, and that 36% are very or somewhat likely to raise worker deductibles. Similar percentages of employers also expressed a likelihood of raising co-pays for office visits and prescription drugs.
The most popular health plan remains the preferred provider organization (PPO), with 60% of workers enrolled. The survey reported that 8% of workers had high-deductible plans with savings options, unchanged from the year before. These health plans have not gained much traction among workers, the survey sponsors say.