Employers Experienced 12.7% Increase in Health Insurance Costs in 2002, Survey Says

Employers experienced a 12.7% increase in health insurance costs this year -- the highest one-year increase since 1990 -- and employees are contributing more in premiums and copayments for their health coverage, according to a survey released yesterday, the Washington Post reports. Conducted by the Kaiser Family Foundation and the Health Research and Educational Trust, the annual survey on employer health insurance is based on responses from 3,262 public and private employers (Brubaker, Washington Post, 9/6). The survey found that the increase in health care costs was driven mostly by larger insurance claims, which resulted from higher costs for prescriptions and hospital services, the Los Angeles Times reports. In addition, an aging population, costlier medical technology and looser controls over managed care have increased health care claims and thus employers' costs, the survey indicates. Employers can expect health costs to continue to increase, the survey indicates. Drew Altman, president of the Kaiser Family Foundation, said, "I suppose the enemy is us, the American people. We want more medical technology, we want it in our community and we want it now" (Lee, Los Angeles Times, 9/6). HRET President Mary Pittman added, "Choice equals cost. If people want choice, they'll have to pay for it" (Snider, Bloomberg/Atlanta Journal-Constitution, 9/6).

The survey also indicates that while a "strong economy and tight labor market" had shielded workers from rising health care costs in previous years, that began to change last year (Appleby, USA Today, 9/6). While employers still cover most of the cost of insurance, employees' share of costs rose "substantially" between 2001 and 2002, the Post reports (Washington Post, 9/6). Overall, 56% of large firms increased employees' share of health costs this year, and 78% expect to increase employees' costs next year (Bloomberg/Atlanta Journal-Constitution, 9/6). For example, the average monthly worker contribution to family health plans increased from $150 in 2001 to $174 in 2002, a difference from the more modest increases experienced between 1996 and 2001, according to the findings. The average annual premium in an employer-sponsored plan was $3,060 for individual coverage in 2002, with employees typically paying 15%, or $454, of the cost. The average cost of family coverage was $7,954, with employees covering 26%, or $2,084, of the cost in 2002 (Los Angeles Times, 9/6). Workers also are sharing more health costs in the form of higher copayments for prescription drugs, office visits and hospital care. Jon Gabel, an HRET researcher, said that for a family with an annual income of $30,000, the added health costs could consume more than half the average pay raise.

The survey also found that more than 33% of large employers raised premiums for retiree health plans in 2002, and 17% increased retirees' prescription drug copayments (Freudenheim, New York Times, 9/6). Further, 11% of large employers said they plan to eliminate retiree benefits for new or existing workers in the next two years. The number of small businesses offering health coverage declined from 67% to 61% last year, the survey indicates. Altman said that small employers are "particularly vulnerable" to premium increases because they have less negotiating power with insurance companies than do large firms (Washington Post, 9/6).

"With increasing health care costs and a sputtering economy, we will see an increase in the ranks of the uninsured," Altman said (Los Angeles Times, 9/6). He added, "Rising health care costs and worker anxiety will propel this issue right to the very forefront of the national agenda" (Rovner, CongressDaily, 9/5). However, increased costs "will also make it much harder to solve our big-ticket health problems -- drugs for seniors and the uninsured," Altman said, adding, "These numbers have huge implications for the national debate about expanding health insurance coverage, regardless of whether taxes pay the costs or private insurance pays" (New York Times, 9/6). The survey is available online.

The following broadcast programs covered the study results:

• ABCNews' "World News Tonight": A transcript of the segment is available online (Norris, "World News Tonight," ABCNews, 9/5).
  
• NBC's "Nightly News": A transcript of the segment is available online (Myers, "Nightly News," NBC, 9/5).
  
• NPR's "All Things Considered": The full segment is available in RealPlayer online (Silberner, "All Things Considered," NPR, 9/5).
  
• MPR's "Marketplace": The segment will be available online (Ott, "Marketplace," MPR, 9/6).