Health Plans’ Costs Inflict Severe Pain

Sep. 15–Here’s painful news as the season nears for workers to sign up for health insurance: The annual cost of medical coverage vaulted 9.2 percent over the past year — pushing the average premium past $10,000 for the first time nationwide.

Premiums now cost more than a minimum-wage worker earns in a year and nearly a quarter of the pay of the average American worker, according to a survey released Wednesday by the Kaiser Family Foundation.

Companies, which pay the lion’s share of workers’ premiums, increasingly are being priced out of the market. Just 60 percent of companies provided insurance in the 2005 survey, down from a peak of 69 percent in 2000.

Premiums are only one part of the rising costs, however. Workers who get sick could face thousands of dollars in additional medical bills, another study says.

Soaring premiums have been particularly tough on small businesses like American Blinds and Draperies in Hayward, whose insurance bills have nearly tripled since 2000 for the company’s 50-plus employees.

“I couldn’t get away with increasing my prices like the insurance industry does,” said Chief Executive Paul Russo.

Health insurance costs put him at a disadvantage with competitors relying on less expensive offshore labor. “It seems like the insurance companies are doing everything they can do to put the nail in the coffin on small businesses,” Russo said.

Since 2000, premiums have risen 73 percent — nearly five times higher than wages and inflation. And they’re only going to get higher, said Glenn Melnick, a health policy professor at the University of Southern California and a Rand consultant.

“These rates of increase we’re seeing are not going to go away,” he said. “Plan for it. . . . It’s going to get more expensive next year.”

The ever-escalating tab is tightening the financial vise on employers and workers alike. For consumers, it means digging deeper to pay their share of the premiums or medical bills if they get sick. They must choose between plans with cheaper premiums and those with broader coverage, or by skipping coverage altogether.

Rising insurance prices put pressure on employers to shift more of the health care tab to workers, hold off providing coverage or not hire more workers.

“We’re reticent to hire full-time employees and would rather bring in temporary employees,” said John Hunter, owner of IBC Creative Packaging in Hayward. “We’re talking a difference of another $10,000 in benefits. There’s definitely a crisis going on in California right now.”

Hunter said IBC’s premiums have jumped nearly 80 percent since 2001. So far, IBC picks up the full premium for eligible workers — a benefit worth about $7,200 for every employee with family coverage. But that could be on the bargaining table when the current union contract expires later this year.

Pete Keesling, owner of San Martin Veterinary Hospital, has already crossed that bridge. With health insurance costs outstripping his ability to pay the full tab, he recently told workers he could provide coverage only if they kicked in part of the premium.

“I had to say, ‘This is stretching us so far, I need your help to contribute,’ ” Keesling said. “It’s too bad, but that’s the way of the world now.”

Keesling braced for a backlash but never felt it. “They knew they were getting a real good deal, but they never saw how good because they weren’t paying the premiums. Now they’re saying, ‘Wow, you were paying that much?’ “

One problem employees and consumers often overlook is that premiums are only part of the equation. If they get sick, they can pay more — maybe thousands of dollars more, according to a study of San Francisco medical plans released Wednesday by the California HealthCare Foundation.

To slow the rise of premiums, insurers in recent years have put patients on the hook for more of their medical bills when they receive care. Patients must pay more to visit a doctor. They must pay a bigger share of the bill for tests, drugs, therapy and hospital stays. And many patients also face higher deductibles — the amount they must pay before their insurance kicks in — or pay thousands before insurance pays the full bill.

Those with the most at risk are people who must buy insurance on their own rather than through an employer. Depending on how sick they are and the kind of coverage they have, patients seeking care could see their out-of-pocket costs range from a few dollars to thousands of dollars.

The study examined several hypothetical cases in three typical medical plans.

In one, someone visits a doctor only once a year and has out-of-pocket costs totaling just $35 to $72. In another, a woman delivers a healthy baby without medical complications and pays $1,460 to $5,364 in out-of-pocket costs. In a third case, someone hospitalized for chronic hypertension and congestive heart failure faces out-of-pocket expenses as high as $10,500.

“Many of the sad stories you hear are from people who just didn’t anticipate a need,” said Marian Mulkey, co-author of the study. “Increasingly, folks in that situation may find it leaves them holding the bag for more costs than they anticipated.”

By Mark Schwanhausser and Rhasheema A. Sweeting

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