YOU ARE HERE: LAT HomeCollections

Health Insurance Costs Jump 11.2%

Families pay $1,000 more than in 2000. 'This system is broken,' one company official says.

September 10, 2004|Debora Vrana | Times Staff Writer

The cost of providing health insurance for American workers has climbed an average of 11.2% this year -- five times as fast as wages -- according to a survey released Thursday.

It now costs an average of $9,950 to insure an employee and three family members -- about the yearly pay of a full-time minimum-wage worker, according to the survey by the Kaiser Family Foundation and the Health Research and Educational Trust. Of that, $2,661 is paid by the employee, the rest by the company.

The jump marked the fourth straight year of double-digit percentage increases.

"There is a great sense that there is just no answer to this problem," said Drew Altman, chief executive of the Kaiser Family Foundation, a nonprofit research organization based in Menlo Park, Calif., that specializes in healthcare issues. "Just for premium contributions alone, families are paying $1,000 more this year for their health coverage than they paid in 2000."

As costs squeeze workers and employers, healthcare has become a central issue in the presidential election campaign.

Several national polls indicate that the cost of care is Americans' top health concern, trumping issues such as obesity, aging and access to medical care, and Democratic nominee Sen. John F. Kerry of Massachusetts cited the Kaiser findings at a campaign event Thursday in Iowa.

If the trend continues, analysts said, more companies will stop offering health benefits to their workers and more wage earners -- especially those with families -- will join the ranks of the uninsured because they will no longer be able to afford their share of the costs. Businesses, already hemmed in by energy costs and a balky economy, count rising insurance premiums as another reason to pare back expansion plans and forgo new hiring.

"This system is broken, in our opinion," said Jerry Dubrowski, a spokesman for General Motors Corp., the world's biggest automaker. "To a certain extent, we can try to control costs with various programs, but at the end of the day, we need the input and support of the government to make reforms here."

GM's healthcare costs are expected to top $5 billion this year, or $1,400 for each vehicle the company sells, Dubrowski said.

Kaiser, which is not affiliated with health insurer Kaiser Permanente, surveyed 3,017 U.S. companies for the study. Although the 11.2% increase in healthcare premiums this year represents an improvement over last year's 13.9% jump, the report provided few other comforting statistics.

Since 2000, the cost of employee health insurance has risen 59%, Kaiser found, and workers' share of their health insurance premiums has surged 57% for individual coverage and 49% for a family. During that period, wages increased just 12% -- 2.2% this year.

The number of jobs offering health insurance is plummeting, with 5 million fewer jobs offering healthcare benefits in 2004 than in 2001, the survey found. The U.S. Census Bureau reported recently that the number of Americans without healthcare grew last year to a record 45 million.

"Employees are declining coverage because they can't afford it, and employers are dropping coverage because they can't afford it," said Kirby Bosley, head of the healthcare practice at Mercer Human Resource Consulting in Los Angeles. "There's only so much in costs they can shift to employees."

The survey also indicated that many workers could expect their health insurance costs to continue to rise. More than half of the companies surveyed that employ more than 200 workers said they were "very likely" to increase the amount of employee contributions in the next year. Only 15% of smaller firms -- which are much less likely to provide health coverage for their workers -- said they would do so.

Blue Cross of California, one of the nation's biggest health insurers, expects premiums to go up about 10% next year, depending on an employer's insurance plan. Michael Chee, a spokesman for the Thousand Oaks-based company, said this year's increase represented a "leveling off" in medical costs but warned: "Medical costs are not going to go down."

The rise in costs is being driven largely by bigger insurance claims that stem from higher prices for hospital services and prescription drugs, as well as growing demand for healthcare as the population ages, Kaiser found. Employers and others also have blamed profiteering by big insurers and hospital chains.

Facing these pressures, even some of the world's wealthiest employers have been forced to make changes.

Microsoft Corp. has for years offered among the most complete health benefits packages imaginable -- the company covers all employee premiums without deductibles for workers, their families and domestic partners. But in May, the world's biggest software company introduced its first co-payment, albeit only for some prescription drugs.

Small businesses have been especially hard hit.

Los Angeles Times Articles