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Health insurance premiums rise
By: Jason Tripp - Staff Writer

Posted 9/11/07 - Health insurance premiums paid by workers and their employers rose an average of 6.1 percent this year, outpacing inflation and pay increases and taking a bigger chunk out of families’ budgets, according to a new survey.

Premiums for employer-sponsored health insurance for the average family topped $12,000 — with employees picking up about one-fourth of that cost — although the increase in premiums slowed for a fourth straight year.

Insurance costs probably will rise again next year, according to the survey released Tuesday by the Kaiser Family Foundation, a health care research organization that annually tracks the cost of health insurance. Many of the more than 3,000 companies surveyed said they planned to make significant changes to their health plans and benefits, and nearly half said they were very or somewhat likely to raise premiums.

This year, premiums reached an average of $12,106 for a family of four, with workers paying, on average, $3,281 of that. Premiums to cover a single person cost $4,479, with employees paying $694. The portions both families and single people pay in premiums has nearly doubled since 2001.

The companies reported that premiums for families increased 6.1 percent, on average. That’s the lowest growth rate since 1999, when premiums rose 5.3 percent and cost an average of $2,196 for individuals and $5,791 for families. Health care premiums rose 7.7 percent last year, when individuals paid an average of $4,242 and families paid $11,480.

This year’s slowdown doesn’t mean much when it outpaces wages, which rose an average of 3.7 percent, and inflation, which went up 2.6 percent, said Drew Altman, the foundation’s president and CEO.

Since 2001, the cost of premiums has gone up 78 percent, far outpacing a 19 percent increase in wages and 17 percent jump in inflation.

“It just shows health insurance is becoming increasingly unaffordable for working people and many businesses in our country,” he said.

That rising cost, coupled with the fact that it is outpacing inflation and wage growth, is pushing companies and employees to forgo insurance, Altman said. And that’s why the number of uninsured Americans continues to rise, he said. The Census Bureau estimates 15.8 percent of Americans were uninsured last year, up from 15.3 percent the year before.

Health insurance companies continue to see higher profits, but premiums keep going up because costs rise each year, said Gary Claxton, vice president of Menlo Park, Calif.-based Kaiser. And much of that is because, through the years, the health care system produces more tests, procedures and products that can treat more people, and all of that costs more, he said.

Some 158 million people have health insurance through their employers. Sixty percent of companies offer health insurance to their employees, about the same as last year but down from 69 percent in 2000.

The larger a business, the greater the chance it offers health insurance. Though premiums may be similar for smaller and larger companies, smaller ones have higher deductibles, Kaiser says, and their administrative costs for plans may be higher because there are fewer employees over which to spread the costs. Nearly all companies with 50 or more employees offer coverage, with firms with more than 200 employees particularly stable over the years. But only 45 percent of firms with three to nine employees offer health care, down from 57 percent in 2000.

It’s frustrating to know that premiums keep rising each year, but dropping or reducing coverage is not an option, said Jack Ross Williams, who owns four vehicle emissions testing sites called Smog ’N Go around Elk Grove, Calif.

He said he’d rather keep co-pays for doctor visits and drugs stable at $20 than switch to a lower-priced plan and skimp on coverage for the dozen employees who get insurance through his company. But that means the employees who enroll in the company’s HMO also feel the pinch because they split premiums equally with the company. For September, premiums for single employees ranged from $232.46 to $312.74.

“I guess we’re both biting the bullet,” Williams said. “My employees that want to keep it, they have to pay more every year. And I absorb half of that cost as well, so we do it jointly.”

Many companies, like Williams’, are just going to keep on paying and not cancel plans, the Kaiser survey said. Only 3 percent of respondents said they planned to drop coverage next year. Five percent said they planned to limit eligibility, though the survey did not ask them how they would do that.

But more companies are looking at changing benefits, whether by adding lower-cost insurance options or shifting more costs to employees, according to the Kaiser survey and another that was recently released.

Preliminary results of the Mercer Health & Benefits survey of 1,557 employer plans shows more than half of the respondents planned to shift costs to employees through higher premiums, deductibles, co-pays or out-of-pocket maximums.

The companies said that if they made no changes to their plans from this year, their costs would go up on average 9 percent next year.

The New York-based human resources consulting firm said given those changes, next year’s increase to premiums is expected to be 6.7 percent.

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