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Percentage of Firms Offering Health Insurance Declines, Report Says

Posted on: Sunday, 18 September 2005, 18:00 CDT

Sep. 18--Sixty percent of U.S. businesses offered health-care insurance coverage to their employees in 2005, a significant decline from 69 percent in 2000 and 66 percent in 2003.

The Kaiser Family Foundation and Health Research and Educational Trust reported Wednesday that coverage cost increases have outpaced inflation and wage growth.

The decline in health care coverage is found "almost entirely" in small businesses, the survey found. Ninety-eight percent of establishments with 200 or more workers continue to offer such benefits.

"It is low-wage workers who are being hurt the most by the steady drip, drip, drip of coverage draining out of the employer-based health insurance system," said Kaiser foundation president Drew Altman.

Average annual premiums for family coverage reached $10,880 this year, "eclipsing the gross earnings for a full-time minimum-wage worker ($10,712)," the report said.

"The average worker paid $2,713 toward premiums for family coverage in 2005, or 26 percent of the total health premium," the report said, adding that workers "are now paying on average $1,094 more in premiums for family coverage than they did in 2000."

The survey of 2005 health benefits found that premiums increased an average of 9.2 percent. That was somewhat good news. Average premium costs increased 11.2 percent in 2004.

"The 2005 increase ended four consecutive years of double-digit increases, but the rate of growth is still more than three times the growth in workers' earnings (2.7 percent) and two-and-a-half times the rate of inflation (3.5 percent)," the foundation reported. "Since 2000, premiums have gone up 73 percent.

A separate report released Tuesday by Mercer Human Resource Consulting said that employers expected a 10 percent increase in premium costs in 2006. The Mercer report also said that employers planned to shift more of the cost increase to their workers rather than subsidize the higher costs.

Cost-shifting strategies have, for the last three years, allowed employers to absorb less than the total cost increase. For example, even though employers expect health insurance costs to rise 10 percent next year, they are budgeting an average 6.4 percent spending increase, meaning that the remainder of the increase will be covered by employees.

Only 1 percent of the more than 2,000 employers Kaiser surveyed said they were "very likely" to drop health care coverage "in the near future."

The survey also indicated that some cost-control devices -- such as consumer-directed health plans, health savings accounts, and high-deductible arrangements -- are having little effect, partly because they are rarely used.

The report estimated that just 2.3 percent of nonfederal, covered workers (about 1.6 million) are enrolled in high-deductible plans and that only 1.2 percent (about 810,000 covered workers) use health savings accounts.

Experience with consumer-driven health plans is too limited to know whether they will have a meaningful effect on cost controls, said Gary Claxton, a Kaiser foundation vice president and co-author of the report.

Pete Levi, president of the Greater Kansas City Chamber of Commerce, said small businesses locally were responding to higher health insurance costs by joining the chamber's pooled health insurance program, which "gives them the opportunity to get large-company health care benefits at a good deal and with a guaranteed rate cap for the second year."

About 6,000 area businesses, each with fewer than 50 employees, are members of the chamber's plan.

Health insurance companies tell the chamber that they lose more customers each year to the ranks of the uninsured than to competing insurance providers, Levi said.

The Kaiser study also charted the continued demise of traditional, or indemnity, benefit plans, which cover just 3 percent of workers this year.

The use of preferred provider organization (PPO) plans grew, with 61 percent of covered workers having such coverage this year (up from 55 percent in 2004).

Enrollment in health maintenance organization (HMO) plans fell to 21 percent of the covered population, down from 24 percent in 2004.

The remaining 15 percent of covered workers are in point-of-service plans.

The survey sample was drawn from a Dun & Bradstreet list of employers with three or more workers, and statistics reported have a confidence level of plus or minus four percentage points.

The complete report is online at www.kff.org/insurance/7315.

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Source: The Kansas City Star (Kansas City, Missouri)

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