The average cost of health insurance for a family of four has soared past $10,800 -- exceeding the annual income of a minimum-wage earner, according to a survey released Wednesday.
For some, this year's survey by the Kaiser Family Foundation and the Health Research Educational Trust was the latest sign that a relentless rise in premiums threatens to collapse the central pillar of America's health insurance system: job-based health coverage. Since 2000, premiums have gone up 73%, while wages have grown 15%, Kaiser researchers concluded.
For The Record
Los Angeles Times Tuesday February 14, 2006 Home Edition Main News Part A Page 2 National Desk 1 inches; 39 words Type of Material: Correction
State of the Union -- In a Jan. 29 Washington Outlook column on President Bush's address, and in previous columns, about 46 million Americans were said to lack health insurance. That figure included noncitizens living in the United States.
Rising costs are forcing many businesses, especially smaller companies, to stop offering coverage and are causing some employees who can no longer afford insurance at work to buy it on their own -- or go without.
"What we are seeing is an unraveling of the way we finance healthcare in the United States," said William Custer, director for the Center for Health Services Research at Georgia State University in Atlanta. "It is coming apart at the edges, and those edges are small business and low-wage workers. The levees are breaking."
Drew E. Altman, president of the Kaiser Family Foundation, said the cumulative effect of rising costs was that "we are seeing a slow deterioration of our employment-based health insurance system, which is the backbone of healthcare in this country."
As the Kaiser report was being released Wednesday, Starbucks Corp. Chairman Howard Schultz said his company would spend more on health insurance for its employees this year than on raw materials needed to brew its coffee -- a sign, he said, that American businesses face a healthcare crisis.
"It's completely nonsustainable," he said, even for companies such as his that "want to do the right thing."
The Kaiser Foundation survey, published each fall before workers choose policies in open-enrollment periods, is considered the definitive measure of what coverage will cost workers and employers.
This year researchers, who collected data from 2,995 randomly selected U.S. employers, estimated that premiums for family coverage grew 9.2% from last year to $10,880, including company contributions -- more than the $10,712 a worker earns before taxes at the federal minimum wage.
The average worker's share of premiums for family health coverage was $2,713 in 2005, or about a quarter of the total cost. The average employee contribution has increased by more than $1,000 in three years.
The premium increase is less than the Kaiser survey has found in recent years -- the jump was 11.2% in 2004 and 13.9% in 2003 -- but it continues a trend that is hard on employers and families alike.
Employers, equally hard-pressed by the rising costs, increasingly are dropping health coverage as an employee benefit or offering high-deductible plans that shift more cost -- and more risk -- to employees. Just 60% of businesses offered health insurance this year, down from 69% in 2000, the study found.
The employer-sponsored system of healthcare in the U.S. is relatively recent, tracing its roots to wage and price controls implemented by the government during World War II. To attract workers, some companies began offering health benefits as a perk, said John R. Graham, director of healthcare studies at the Pacific Research Institute in San Francisco.
But "employers don't have a competitive advantage to providing you health insurance any more than they have in buying you a house or a pair of running shoes," Graham said.
Small companies are most likely to drop coverage because of cost concerns, according to Menlo Park, Calif.-based Kaiser Family Foundation, which is not affiliated with healthcare provider Kaiser Permanente.
"When we consider that it is small business that drives the economy -- to have that engine resting on the backs of millions of uninsured workers is a bad proposition for the U.S. economy," said Peter Lee, president of the San Francisco-based Pacific Business Group on Health, an alliance of employers that buys insurance for big companies. "This has to be seen as a wake-up call to policymakers and healthcare providers as it puts an increasing burden on an already frayed safety net."
Insurers blame doctors, hospitals and consumer demand for new medical technology for escalating rates.
"Prices are going up, especially for hospitalization," said Chris Ohman, president of the California Assn. of Insurers, a trade group.
But consumer advocates question why premium increases are needed as insurance industry profits rise.
"What the HMOs can't explain is why premiums are increasing twice as fast as hospital and physician costs," said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights, a Santa Monica nonprofit.