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Health Insurance Costs Climb Again

Premiums Up 5% This Year to Double 1999 Cost of Health Insurance
By
WebMD Health News
Reviewed by Louise Chang, MD

Health Insurance Premiums Rising

Sept. 24, 2008 - Health insurance premiums and deductibles are up again this year -- to more than double the 1999 cost to workers and employers.

The findings come from the annual Kaiser Family Foundation's Employer Health Benefits survey. Conducted from January to May 2008, the survey included 2,832 randomly selected companies with three or more employees.

Here's some background for the survey: In an August 2008 Kaiser poll, nearly one in four American families said paying for health care and health insurance is a "serious problem."

This year's increase in health insurance costs was relatively small: only 5% more than last year. This means the average worker pays $3,354 out of her or his paycheck to cover 2008 health insurance premiums. The cost in 1999: $1,543.

Employers pay more, too. The average employer contribution was $9,325 in 2008, up from $4,247 in 1999.

For all that money, workers get less. Deductibles and co-pays -- costs people pay before insurance kicks in -- are up, too. Last year, 12% of workers faced deductibles of at least $1,000. That's up this year to 18% of all workers, and up to 35% of workers in firms with three to 199 employees.

There's been steady growth in so-called "consumer-directed plans." In these plans, workers and employers contribute to a health savings account (HSA) or have a health reimbursement arrangement (HRA).

The most important features of consumer-directed plans are lower costs to employers and higher costs to workers. Small firms are most likely to offer these plans, which have an average general deductible for single coverage of $2,010 for HSAs and $1,552 for HRAs.

"Health insurance is steadily becoming less comprehensive, and it's no wonder that in today's tough economic climate many families count health care costs as one of their top pocketbook issues," Kaiser CEO Drew Altman, PhD, says in a news release.

Other facts from the Kaiser survey:

  • 58% of those with employer health insurance are in PPOs (preferred provider organizations).
  • 20% of those with employer health insurance are in HMOs (health maintenance organizations).
  • 49% of the smallest firms (three to nine workers) offer health benefits.
  • Small businesses pay more for employee health insurance than big firms do.
  • 31% of large firms (200 or more workers) offer retiree health benefits. That's down from 33% in 2007 and 66% in 1988.
  • Most drug plans have three- or four-tier co-payment systems. Average co-pay: $10 for first-tier, $26 for second tier, $46 for third tier, $75 for fourth tier.

Ominously, employers say it's "very likely" or "somewhat likely" that next year they will:

  • Increase the amount employees pay for health insurance: 40% of firms
  • Increase the amount employees pay for deductibles: 41% of firms
  • Increase the amount employees pay for co-pays or co-insurance: 45% of firms
  • Increase the amount employees pay for prescription drugs: 41% of firms
  • Restrict employees' eligibility for coverage: 13% of firms
  • Drop coverage entirely: 6% of firms

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