Employer-sponsored health insurance premiums rose 11.2 percent this year, registering the fourth consecutive double-digit annual increase and pushing the cost of family coverage under the most common type of plan past $10,000, according to a new nationwide survey.
While this year's rise was down slightly from the 13.9 percent of last year, it is still "five times the rate of growth in wages [and of] inflation," said Drew E. Altman, president of the Kaiser Family Foundation, which released the survey of more than 3,000 employers yesterday, along with the Health Research and Educational Trust. Its findings and those of other surveys predict continuing growth of health care costs next year.
The unceasing rise will depress wages, affect hiring decisions and encourage outsourcing, Altman said. The number of uninsured will continue to rise, while the cost shouldered by workers lucky enough to have insurance will also climb, putting greater pressure on family budgets, he said.
The percentage of all workers who have health insurance through their employers continues to slip, with 5 million fewer jobs offering health insurance now than in 2001, the Kaiser survey said. Though the decline in workers who have health insurance through their own employers was slight -- the number fell to 61 percent this year from 62 percent in 2003 -- the drop from the peak of 65 percent in 2001 is "significant," Kaiser said. The share of workers at small firms -- those with three to 199 workers -- getting health insurance declined to 50 percent from 58 percent in 2001.
In contrast to the hopeful outlook of a few years ago, most experts see no prospect of a global solution that will bring costs under control, Altman said. Where once it was thought that managed care or a plan proposed during the Clinton administration might rein in medical costs in a major way, proposals out there today, such as disease management or consumer-driven health care, appear unlikely to have more than a minor impact, he said.
"I have no answer," Altman said. Various strategies may be able to clip a percentage point or two off the growth rate here and there, but "we should be prepared to pay more," he said.
The Kaiser survey's findings parallel the fears surrounding public programs such as Medicare, which also have seen costs soar.
Jack Rowe, chief executive of Aetna, said in an interview yesterday that the findings might, if anything, understate the seriousness of the problem. He noted that the "take-up rate" -- the share of workers who sign up for health insurance when it is offered -- has declined significantly recently, suggesting that an increasing number of people "are not taking up insurance because they can't afford it."
A survey released last month by Mercer Human Resources Consulting found that employers estimate that health care costs would rise almost 13 percent on average next year if they make no changes in their health plans. Even after changing benefits and negotiating with or switching medical providers and insurers, employers said, they expect costs to rise an average of 9.6 percent.
A rise of 13 percent "is painful to consider," said Blaine Bos of Mercer when the study was released. "And some just aren't going to sit still for it."
"The difference between employers' cost projections before and after making changes to their benefit programs suggests we're going to see some considerable cost-shifting to employees next year, especially among smaller employers," Bos said.
The Kaiser study found that overall this year, the average cost of health care coverage for a family is $9,950 ($3,695 for a single worker) this year. Health maintenance organizations (HMOs) are the least expensive type of plan at $9,504 a year for a family and $3,458 for a single worker, while preferred provider organizations (PPOs), which are the most common type of plan and cover 55 percent of workers who have health care, are the most expensive. PPO family premiums average $10,217, while single coverage is $3,808.
Among all plans, workers on average pay $2,661 of the $9,950 annual cost for family coverage and $558 of the $3,695 for single coverage. In HMOs, workers pay $2,674 for family coverage and $552 for single, on average. In PPOs, the figures are $2,691 and $573.
The percentage of premiums borne by workers has remained more or less constant since 1988, at just under 30 percent, the survey found, though Altman said this is a constant share of a steadily rising dollar amount.
The survey found employers only mildly optimistic about new steps to control costs. About 15 percent said they think disease management -- the treating of long-term illnesses on an integrated, coordinated basis, rather than dealing with each problem as it arises -- would be "very effective" in cutting costs. Larger employers with the resources to carry out disease management were the most optimistic about it.
Some experts think consumer-driven health plans -- particularly health savings accounts, which combine a high deductible policy with a tax-free investment account -- hold much promise. Insurers such as Aetna have added such plans to their offerings and think they are promising.
Rowe said neither employers nor providers, such as doctors and hospitals, have come up with effective ways to control costs, and neither had insurers since the "backlash against restrictions [imposed by] managed care."
He said a key finding in recent years has been that people "want to control health care cost increases without restricting choice," and that is where the consumer-driven plans come in.
He said that these plans may not work for all consumers but that he expects them to evolve in ways that will improve their appeal. Current consumer-driven plans "are Release 1.0, if you will," he said.
Advocates of consumer-driven plans argue that they use market forces to hold down health care spending because the consumers get a tax break for saving and then can keep money they don't spend on health care. This gives them an incentive to avoid unnecessary treatment and to shop for the lowest-cost providers.
Aetna said employer interest is rising rapidly, noting that a survey of its employer-customers found that medical costs for those with consumer-driven plans rose only 3.7 percent last year, compared with an 11 percent rise for employers using more conventional plans.
And a recent survey by Deloitte Consulting found that three-quarters of employers that have had a consumer-driven plan for two years say the plans change employees' health care purchasing behavior.
Kaiser found, though, that employers are less optimistic about their potential. Only 11 percent said they expect these plans to be very effective as a cost-containment strategy, though 42 percent said they would be somewhat effective.