Employer-Sponsored Health Insurance Premiums Increased by 11.2% in 2004, Survey Finds

Employer-sponsored health insurance premiums increased an average of 11.2% in 2004 -- the fourth consecutive year of double-digit increases, according to a new survey released Thursday by the Kaiser Family Foundation and Health Research and Educational Trust, the New York Times reports (Freudenheim, New York Times, 9/10). For the study, researchers surveyed 3,017 employers between January and May 2004; 1,925 employers responded to a full survey, and 1,092 responded to a question on whether they offered health insurance (Kaiser Family Foundation/HRET release, 9/9).

This year's premium increase is more than five times the national increase in wages, which rose 2.2% from the spring of 2003 to spring 2004, according to the Bureau of Labor Statistics, the New York Times reports (New York Times, 9/10).

The survey "contains one glimmer of good news" -- the rate of growth in premium rates moderated in 2004, according to the Wall Street Journal. Premiums increased 13.9% in 2003, the Journal reports (Fuhrmans, Wall Street Journal, 9/10). According to Dow Jones, the report "didn't explain the reason for the slight easing in growth of premium costs this year" (Whitehouse, Dow Jones Newswire, 9/9).

Some experts attribute the continuation of premium rate increases to looser control over access to specialists, demands from hospitals and doctors for higher payments, the cost of new medications and technology and the pressures of an aging population, the Baltimore Sun reports (Salganik, Baltimore Sun, 9/10).

The study also states that the proportion of employers offering worker health benefits in 2004 decreased to 63% from 68% in 2001. Moreover, in 2004 there are at least five million fewer jobs offering health benefits than there were in 2001, according to the study (Blanton, Boston Globe, 9/10).

The decline in employer-sponsored coverage is driven in large part by a decrease in the number of small employers -- those companies with three to 199 employees -- that offer coverage, the AP/Detroit News reports (Agovino, AP/Detroit News, 9/10).

Employees' contributions for individual coverage went up 57% since 2001. According to the San Francisco Chronicle, 52% of large employers said they are "very likely" to increase employee health contributions over the next year (Colliver, San Francisco Chronicle, 9/10).

Health plan costs shifted from employers to employees are "less pronounced" in 2004 than in previous years, the study says, according to the AP/Detroit News (AP/Detroit News, 9/10). For instance, the proportion of workers who had to contribute a $20 copayment for an office visit increased to 27% from 19% in 2003 (San Francisco Chronicle, 9/10).

The report also found:

• The average premium increased this year to $9,950 for family coverage and $3,695 for a single employee. Premiums for HMO plans in 2004 averaged $9,504 a year for a family and $3,458 for an individual, and premiums for preferred provider organizations averaged $10,217 for a family and $3,808 for an individual in 2004 (Crenshaw, Washington Post, 9/10).
  
  
• Premiums for family coverage have increased 59% since 2000 (San Francisco Chronicle, 9/10).
  
  
• Workers on average pay $2,661 of the $9,950 annual cost for family coverage and $558 of the $3,695 for individual coverage among all plans. Workers pay $2,674 for family coverage in HMOs and $552 for individual coverage. In PPOs, workers pay $2,691 for family and $573 for individual coverage (Washington Post, 9/10).
  
  
• Employees' share of health premium costs in 2004 is 16% for individual coverage and 28% for family coverage -- figures that are statistically unchanged over the last several years (Kaiser Family Foundation/HRET release, 9/9).
  
  
• The average employee's share of family coverage has risen by more than $1,000 since 2000 (Miller, Atlanta Journal Constitution, 9/10).
  
  
• About 10% of all employers offered a high-deductible health plan in 2004, and 3.5% of those companies offered a personal or savings account option (Rovner, CongressDaily, 9/9).
  
  
• PPOs are the most common form of coverage in 2004, with 55% of employees in such plans (Washington Post, 9/10).

Drew Altman, president and CEO of the Kaiser Family Foundation, said that cost shifting has moderated somewhat because employers aimed to give their workers a break after years of requiring them to pay more for their care (AP/Detroit News, 9/10). He added, "The cost of family health insurance is rapidly approaching the gross earning of a full-time minimum wage worker," (Wall Street Journal, 9/10). Altman said, "We unfortunately should expect the ranks of the uninsured to continue to pick up" (Marshall/Mason-Draffen, Long Island Newsday, 9/10).

Jon Gabel, HRET vice president, said, "Fewer people can afford to get their health insurance. It's a burden on the economy and probably slows down employment growth" (Hopkins, Los Angeles Daily News, 9/10).

Gary Claxton, a Kaiser Family Foundation vice president, said, "Whether we've reached a plateau or not or whether it will go down, we don't know. It's too early to tell." He added, "But I don't think there's any good health policy news here. Costs are still going up very fast relative to inflation" (San Francisco Chronicle, 9/10). According to the Journal, the general rate of inflation in the United States is 3% (Wall Street Journal, 9/10).

Paul Fronstin, director of the health research and education program for the Employee Benefit Research Institute, said, "Some people will look at 11% as compared to 14% as good news, but I still view it as a double-digit increase. It's hard to imagine we won't see a continuation of this trend" (San Francisco Chronicle, 9/10).

Altman said, "There is a great sense that there is just no answer to this problem" (Vrana, Los Angeles Times, 9/10).

The issue of increasing health costs is "a persistent and long-term problem that has no simple fixes," HRET President Mary Pittman said. She added, "There's an elephant in the middle of the room, and we cannot afford any longer to ignore it" (Atlanta Journal Constitution, 9/10).

Kate Sullivan Hare, health policy director for the U.S. Chamber of Commerce, said, "There just aren't that many options left for small business. When you're a small business and you've got a $30,000-a-year employee, you just can't afford to spend $10,000 on health coverage" (Baltimore Sun, 9/10). The study is available online.