Health Insurance Premiums in California Increased 15.8% in 2003, Faster Than National Average
Employees' share of employer-sponsored health insurance premium costs for families in California increased 70% in the past four years, with more than half of that increase coming in 2003, according to a study released Tuesday by the Kaiser Family Foundation and the Health Research and Educational Trust, the San Jose Mercury News reports (Feder Ostrov, San Jose Mercury News, 3/17). The study found that health insurance premiums for employer-sponsored plans in California rose an average of 15.8% in 2003, compared with a national average increase of 13.9%. The increase was the state's largest in four years and was seven times the rate of consumer inflation. Although California rates rose more quickly than national rates, in dollar amounts, premiums in California are still lower than the national average (Wolfson, Orange County Register, 3/17). For the study, the Kaiser Family Foundation surveyed 864 California businesses and found that 70% of employers offered health insurance, the same rate as in 2002, but employers "continued to shift more of the cost of health benefits to their workers, especially those with families," the Los Angeles Times reports (Lee, Los Angeles Times, 3/17). The study also found the following:
- Employee contributions for employer-sponsored health insurance in California increased 22% for individual coverage and almost 35% for family coverage in 2003 compared with 2002 (Rapaport, Sacramento Bee, 3/17).
- The average health insurance plan for a family of four in California cost $8,504 per year in 2003, with employees required to pay $2,452 on average.
- The average health insurance plan for an individual in California cost $3,102 per year in 2003, with employees required to pay $418 on average (San Jose Mercury News, 3/17).
- Benefit levels for 84% of covered California workers in 2003 did not change, while 10% of covered workers were in plans that reduced benefits and 6% of covered workers were in plans that increased benefits.
- Among large California employers -- with 200 or more employees -- 68% increased the amount employees pay for coverage in 2003, 46% increased the amount employees pay for prescription drugs, 32% increased the amount employees pay in deductibles and 42% increased copayment and coinsurance for employees.
- Forty-one percent of California employers used of tiered prescription drug plans in 2003, up from 35% in 2002 and less than the 2003 national average of 63%.
- Among large California employers, 85% offered more than one health plan option in 2003, compared with the national average of 57% (Kaiser Family Foundation release, 3/16).
While California's health insurance premiums grew at a faster rate than the national average in 2003, in dollar amounts, the premiums are still lower than the national average because of the state's "high concentration" of HMOs, which are "more restrictive but less costly," the San Francisco Chronicle reports (Colliver, San Francisco Chronicle, 3/17). The average annual premium for family coverage was $8,504 in California, compared with $9,068 nationwide. The average premium for individual coverage was $3,102 in California, compared with $3,383 nationwide (Orange County Register, 3/17). In 2003, 52% of California workers were enrolled in HMOs, compared with 24% nationwide. In addition, about 29% of California employees were enrolled in preferred provider organizations, which offer more choice but are more expensive, compared with 54% nationwide (San Francisco Chronicle, 3/17). Despite overall lower premiums than the rest of the United States, the rapidly rising rates mean that California "has all but lost its golden status as the place with the nation's most affordable health insurance rates," the Bee reports. Peter Lee, president of the Pacific Business Group on Health, said, "With workers' compensation insurance costs soaring, and housing costs already so high, the loss of the relative advantage that affordable health care gave many California businesses couldn't come at a worse time" (Sacramento Bee, 3/17). "Are we losing our advantage? Very possibly," Chris Thornberg, a University of California-Los Angeles health care economist, said.
Kaiser Family Foundation analysts said that the higher premium increases in California in 2003 occurred in part because of changes made to the state's managed care plans allowing consumers to access more doctors and hospitals, according to the Times. Industry executives and consultants said that other factors contributing to the growth included rising hospital charges to meet state-mandated nurse-to-patient ratios and seismic retrofit requirements. Jeff Miles, president of the California Association of Health Underwriters, said that "significantly less competition" among insurers has given them more control over rates, further increasing premiums (Los Angeles Times, 3/17). Paul Ginsberg, president of the Center for Studying Health System Change, said, "Managed care for years helped keep health costs lower in California than in the rest of the country. Now it appears that many of the tools HMOs used to generate savings are no longer effective" (Sacramento Bee, 3/17). Drew Altman, president and CEO of the Kaiser Family Foundation, said, "The last three years of double-digit premium increases in California have been particularly hard for working families, who have seen their contributions for family coverage increase by almost 70% over this period" (Kaiser Family Foundation release, 3/16). "If there was good news in California last year, it's that we did not see firms dropping coverage entirely," Alina Salganicoff, a senior analyst with the Kaiser Family Foundation, said, adding, "The bad news is, health spending continues to go up and the level of benefits keeps going down." Gerry Shea, head of national health policy for the AFL-CIO, said, "There's no doubt that the dominant trend in health care financing is to shift more costs to individuals," adding, "In all our major contracts, it cost wages and jobs for people to maintain health benefits" (Sacramento Bee, 3/17). Report author Gary Claxton said, "I think there's reason to believe that maybe this year the premium increases won't be as large as they were last year." However, Claxton added, "Even the people who say costs are moderating are still talking about close to double-digit increases. So I think costs are not going away as a political issue at all" (Orange County Register, 3/17).
In related news, almost half of California workers believe that employers should be required to offer health insurance to all employees, according to a California HealthCare Foundation study published in Wednesday's online edition of the journal Health Affairs, the Chronicle reports. The study surveyed 538 working-age adults in California and 1,479 working-age adults nationwide and found that 48% of California workers and 50% of workers nationwide support requiring employers to offer health insurance to all employees (San Francisco Chronicle, 3/17). SB 2, scheduled to take effect Jan. 1, 2006, will require employers with 200 or more employees to provide health insurance to workers and their dependents by 2006 or pay into a state fund that would provide such coverage. Employers with 50 to 199 employees will have to provide health insurance only to workers by 2007. The law will exempt employers with fewer than 20 employees. The law also will exempt employers with 20 to 49 employees unless the state provides them with tax credits to subsidize the cost of health insurance for employees (California Healthline, 3/16). The law is being challenged by a ballot initiative in November sponsored by the California Chamber of Commerce (San Francisco Chronicle, 3/17). An abstract of the study is available online.This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.