Health Insurance Premiums Increased 13.9% in Last Year, Survey Finds
Private health insurance premiums rose 13.9% between the spring of 2002 and the spring of 2003, the third consecutive year of double-digit premium increases and the largest such increase since 1990, according to a survey by the Kaiser Family Foundation and the Health Research and Educational Trust, USA Today reports (Appleby, USA Today, 9/10). The 2003 Annual Employer Health Benefits Survey, which was conducted between January 2003 and May 2003, includes responses from 2,808 public and private firms, ranging in size from three to more than 300,000 employees (KFF release, 9/9). Factors behind the increase include higher prices for hospital care, prescription drugs and other services; higher use of medical care; and patients' preference for less-restrictive managed care plans, USA Today reports (USA Today, 9/10). Health care costs increased six times as fast as the estimated inflation rate for the rest of the economy, the Philadelphia Inquirer reports (Pugh, Philadelphia Inquirer, 9/10). Despite the rise in health insurance costs, 66% of companies provided health benefits in 2003, about the same as did in 2002, the survey says (Fuhrmans, Wall Street Journal, 9/10). The survey finds that average private health plan premiums rose to $3,383 for individual coverage, with employers paying 84% of the cost on average. Average premiums for family coverage rose to $9,068, with employers paying 73% of that cost on average (Vrana, Los Angeles Times, 9/10).
According to the survey, employees' portion of premium costs continued to grow in 2003; employees with individual coverage paid an average of $508 per year in premiums, up 52% from $334 in 2000 (KFF release, 9/9). Employees with family coverage paid an average of $2,412 this year, up 49% from $1,619 in 2000 (Brubaker, Washington Post, 9/10). The survey also says that 65% of companies increased employees' share of health costs in 2003. In addition, 79% of large firms said that they will increase workers' share of health costs in 2004, possibly contributing to a fourth straight year of double-digit increases in health insurance premiums, the New York Times reports (Freudenheim, New York Times, 9/10). Only 10% of firms said they would reduce eligibility and 16% said they would drop coverage entirely in the future (KFF release, 9/9).
Other findings from the survey include:
- About 62% of employers looked for different health plan arrangements in 2003, and 33% of those employers subsequently changed insurance carriers or plan types (Los Angeles Times, 9/10).
- Employees faced higher deductibles for out-of-network services in preferred provider plans, higher copayments for office visits in HMOs and higher copayments for prescription drugs in all plan types.
- About 38% of firms with 200 or more employees offered retired employees health insurance, a percentage unchanged from 2002 but down from 66% of all such firms in 1988 (Washington Post, 9/10).
- About 17% of firms with more than 5,000 employees offer a high-deductible plan -- a plan with a deductible of at least $1,000 for individual coverage -- and another 16% of such firms say the will add a high-deductible plan in 2004 (KFF release, 9/9).
Drew Altman, president and CEO of the Kaiser Family Foundation, said, "Employers are between a rock and hard place. They're trying to hang on to insurance as best they can and they're eating some of those costs, but they're also passing on more and more costs to their employees" (Colliver, San Francisco Chronicle, 9/10). Jon Gabel, vice president for Health Systems Studies at HRET, said, "Given the state of the economy and the rapid rate of inflation, I don't think we have seen the worst of increased cost sharing with employees" (New York Times, 9/10). HRET President Mary Pittman, said the aging baby boomer generation has contributed to increasing health costs, as baby boomers are receiving more health services than before, adding, "We will continue to see that drive cost and utilization" (Dorschner, Miami Herald, 9/10).
Paul Ginsburg, president of the Center for Studying Health System Change, said that the reason so few companies ended employee health benefits in 2003 is because they were able to pass some of the costs on to workers (USA Today, 9/10). However, Diane Swonk, chief economist at Bank One, said that companies are "only able to ladle a portion" of increasing health insurance costs to workers and that many companies have found it difficult "to keep up with the sheer magnitude of the increases" in health insurance costs over the last several years. "I think this is one of the key reasons why businesses are not hiring, despite the improvements in demand and production," Mark Zandi, chief economist at Economy.com, said, adding, "It's not just the recent health care premium increases. It's the prospect that those premiums will be rising as quickly long into the future" (Marshall, Long Island Newsday, 9/10). "People have become used to the idea that health care costs continue to go up very rapidly, faster than their wages and faster than inflation," Gary Claxton, a Kaiser Family Foundation vice president and director of its Healthcare Marketplace Project, said, adding, "All we can say is that they are going to keep going up, period" (Los Angeles Times, 9/10). "There's a lot of uncertainty about what to do" about the increasing costs, Claxton added (Rovner, CongressDaily, 9/9). Altman said, "We're still a long way from a new big answer or a solution to this problem" (USA Today, 9/10). Gabel suggested that one way to reduce premium increases is to more tightly restrict care, saying, "I don't see any other way to get (premiums) down other than bitter medicine" (Lipman, Atlanta Journal-Constitution, 9/10).
The survey and other materials are available online. The survey also appears in the September/October 2003 issue of Health Affairs. Claxton is scheduled to discuss the study Sept. 10 in an online chat on washingtonpost.com at 2:00 p.m. ET. Questions and comments may be submitted prior to the beginning of the chat.
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.