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Health Care Premiums Soaring, Study Says

Posted on: Tuesday, 9 September 2003, 06:00 CDT

Health care premiums for families in employer-sponsored plans soared 13.9 percent in 2003, the third year of double-digit growth and the biggest spike since 1990, a new study found.

Annual family premiums increased to $9,068 this spring, according to a survey of 2,808 companies by two health research organizations, the Kaiser Family Foundation and the Health Research and Educational Trust.

Small firms, with three to nine workers, faced the largest increase with a 16.6 percent surge in premiums. Mid-sized companies with between 200 and 999 workers had the smallest increase with a 12.4 percent growth rate.

The portion of the premium paid by an employee for family coverage grew 12.9 percent to $201 a month, or $2,412 annually, while the amount a single employee paid for a policy rose 7.6 percent to $508 a year, or a little more than $42 a month. Employers paid the remainder of the $3,383 premium for a single coverage.

Experts were not surprised by the rise because employees have shunned the restrictive policies of managed care plans, which sought to reduce costs, while they still demanded the newest, most expensive drugs and procedures.

With that issue unlikely to change - and no new strategies employers believe will substantially reduce costs - the trend of bigger health care spending is expected to continue.

"The key finding is not a surprise but that doesn't mean it is not important," said Drew Altman, president of the Kaiser Family Foundation. "This is more bad news for employers and working people."

On a brighter note, Altman said companies are not dropping coverage despite rising costs and a poor economy. The survey found that 66 percent of companies provide health care coverage, the same as last year.

The percentage of premiums paid by employees is substantially unchanged over the last two years, at 16 percent for single coverage and 27 percent for family coverage.

Altman doesn't view this as a victory for workers, however.

"From the point of view of a consumer the 16 percent is meaningless. They are still paying a lot," Altman said.

Employees' out-of-pocket costs are continuing to rise. For example, employees must now shell out a $29 co-payment for a prescription drug that's not on a preferred list of medicines, up from $25 last year, and $20 in 2001. A preferred prescription requires an average co-payment of $19, up from $17 last year and $15 in 2001.

Employers are shopping around for new options. The survey found that 62 percent sought a new health plan, but only 33 percent changed. Experts say that's because employers don't want to put administrators and workers through the hassle of switching plans unless savings are assured.

Wurth Group of North America is currently shopping for a new plan for its 2,325 employees after its premiums rose 20.5 percent this year, atop a 21 percent jump in 2002.

"It is a hassle to change plans so the savings have to be material," said Gerald Rudick, vice president of human resources of the New Jersey-based maker of fasteners, bolts and screws. "I'm not sure what the magic saving number is - is it $100,000, $1 million? We just don't know."

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On the Net:

Kaiser Family Foundation: http://www.kff.org

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