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Health Costs Keep Rising; Employers, Workers Pay $10,880 for Coverage

Posted on: Thursday, 15 September 2005, 15:01 CDT

Five years of steep and steady price increases have pushed the cost of providing health insurance for a family of four to a national average of $10,880 or more than a worker earning federal minimum wage makes in a year, according to an annual survey released Wednesday.

Since 2000, the cost of health insurance for employers has risen 73% compared with a 14% rise in consumer prices, according to the survey by the Kaiser Family Foundation and the Health Research and Education Trust, non-profit organizations that research health policy issues.

The survey reported that the average annual premium increased 9.2% in 2005, down from an increase of 11.2% in 2004.

This year's increase comes after four consecutive years of double- digit increases. The increase more than double the overall inflation rate of 3.5% also shows that health care costs continue to rise sharply.

"We have a Katrina in health care coming this way," said Jim McCormack, chairman and chief executive of Diversified Insurance Services, an independent insurance brokerage and benefits consultant in Waukesha. "This is not going to go away."

Health care costs which rose at a slower pace in the mid-1990s began increasing sharply at the start of this decade. Consolidation in the hospital industry, which gave hospitals more power to raise prices, has been a factor. So, too, are higher prescription drug costs and less competition among insurance companies. In addition, more people are developing health problems as the population ages.

"It's become a tremendous burden on employers' bottom line," McCormack said.

The average annual premium for employer-sponsored coverage is now $4,024 for one person and $10,880 for a family of four, according to the survey. Workers on average contributed $610 a year toward the cost of individual coverage and $2,713 toward family coverage.

Those costs don't include deductibles, co-pays and co-insurance.

That, though, is a national average. Health care costs in southeastern Wisconsin are higher than in many parts of the country. And a report released Wednesday by the U.S. Government Accountability Office found that doctors charge higher fees in Wisconsin than doctors in other states.

"People should realize that there is variation here," said Gary Claxton, vice president of the Kaiser Family Foundation and co- author of the survey. "Everybody wants to focus on the average. Nobody is average."

Some companies had premium increases of 5% or less. Those companies employed about 32% of the workers in the survey. Other companies had increases of more than 15%. Those companies employed about 17% of the workers in the survey.

The survey's results, though, were generally in line with other recent surveys. It was based on findings from 2,013 private and public employers, ranging in size from three to more than 300,000 employees.

Last month, United Benefit Advisors, an alliance of insurance brokerages and benefit consultants, released a survey that found the average premium for health insurance increased 9.6% nationally. The average increase was 7.2% in southeastern Wisconsin and 8.7% for the state.

For many small businesses, however, the cost has increased at a higher rate than the national or state averages. For one thing, their costs can be tied to the health of their workers.

Storage Battery Systems Inc., a family business that employs about 45 people in Menomonee Falls, for instance, saw the cost of health benefits increase 23% this year, said Scott Rubenzer, the company's president.

The company, which designs and makes battery power supplies, spends more than $12,000 a year for family coverage and that's just the company's share of the cost. In all, the company will spend more than $300,000 this year on health and dental benefits.

"It's a responsibility most business people would rather not have," Rubenzer said. "I'd rather sell batteries."

The cost has forced more small employers to stop offering the benefit.

The Kaiser survey found that the number of companies that offer health benefits has dropped to 60% from 69% in 2000. The drop stems almost entirely from small businesses.

The survey found that 98% of businesses with more than 200 employees offer health insurance. But Claxton, the survey's co- author, said that it is not known how many of those large employers are making greater use of part-time workers not eligible for benefits.

Low-wage workers also may not be able to afford health insurance even when it is offered.

It will become increasingly hard for low-wage workers, Claxton said, to continue to get health insurance from employers.

"I can't see anything going on that's good for them," he said.

The survey found that 20% of employers who offer health insurance now offer the option of a health plan with a high deductible. It also found that nationally, large companies were more likely to offer that option.

But small businesses also are turning to high-deductible plans, often combined with a health savings account, because of their lower costs.

In recent years, Storage Battery Systems switched to plans with higher deductibles for that reason, Rubenzer said. The result is that the business is paying more for less insurance.

Storage Battery Systems can afford the cost of providing health insurance to its employees. But the cost and frustrations have made Rubenzer open to the idea of national health insurance "something I never thought I'd say in my life," he said.

That viewpoint isn't widespread. But Claxton of the Kaiser Family Foundation said no one has any clear answers on how to slow the rise in health care costs.

"People are worried about it," he said. "But they aren't confident about what to do about it."

Copyright 2005, Journal Sentinel Inc. All rights reserved. (Note: This notice does not apply to those news items already copyrighted and received through wire services or other media.)

Source: Milwaukee Journal Sentinel

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