September 14, 2005

Fewer firms offer health insurance, cite costs

By Susan Heavey

WASHINGTON (Reuters) - The number of U.S. employers
providing health insurance for their workers fell further in
2005, mostly among smaller companies that said they could not
afford the coverage, according to a study released on

About 60 percent of businesses said they would offer health
plans in 2005, down from 69 percent in 2000, according to a
survey of nearly 3,000 companies by the Kaiser Family
Foundation and Health Research and Educational Trust.

The number of employers providing coverage had stabilized
briefly in 2002 and 2003 at 66 percent, but then began falling
again in 2004, to 63 percent.

Employers that did not offer coverage said cost was the
main factor, with 73 percent citing high premiums charged by
insurers. About half also said their small size prevented them
from offering a plan, while about one-third said their workers
could get coverage elsewhere.

Kaiser officials said people who earn less are particularly
vulnerable. Not only could their benefits be cut because of
higher health care costs, but they are less able to afford
their own coverage than those with higher incomes.

"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 Drew Altman, head
of Kaiser's foundation.

Premiums are also rising, but not as much as in recent
years, the report said. They were up an average of 9.2 percent
in 2005, compared with an 11.2 percent rise in 2004. Premiums
had been increasing since 1996, with their sharpest recent gain
at 13.9 percent in 2003.

Still, Kaiser officials said the 2005 increase -- like that
of many other health care services and products -- is far
outpacing inflation and wages.

Gary Claxton, a Kaiser vice president and a lead author of
the study, said small companies are especially squeezed and
have to decide whether to offer lower wages or cut health care

"On average, there are more small firms where people are
paid less," he said.

The telephone survey polled 2,995 public and private
companies with at least three workers between June and May.

The study also found that while some companies are offering
high-deductible plans as a way to trim costs, few workers are
signing up.

About 20 percent of companies that offer any coverage said
they would provide such plans, which require patients to pay at
least $1,000 in out-of-pocket costs before the insurance kicks
in. In 2004, half as many companies offered them.

Mostly larger businesses -- those with 5,000 or more
workers -- used the high-deductible plans, which aim to curb
unnecessary care. But researchers said it was not clear how
willing workers were to shoulder more costs.

"Consumer-driven plans are proving attractive to some, but
with just a couple million people now enrolled, it's too early
to know whether they'll have a meaningful effect on the health
system," Claxton said.

One area where costs remained stable was U.S. workers'
share of their company-funded plans, the study said. In 2005,
they paid about 26 percent of the total cost on average, or
about $2,713.

The Kaiser Family Foundation, which is not affiliated with
health insurer Kaiser Permanente, and the Health Research and
Educational Trust are both nonprofit, private groups that focus
on health policy and research.