Health premium growth slows

WASHINGTON – The price of health insurance premiums rose this year at the slowest rate since 1999 but still outpaced wage growth and inflation by a wide margin for the eighth straight year, according to a national survey of employers.

The 6.1 percent increase marked the fourth straight year that premium growth has slowed for employer-sponsored coverage, according to an annual survey of employers by the Kaiser Family Foundation and the Health Research and Educational Trust.

But the news was hardly cause for celebration. Since 2001, family coverage premiums have jumped 78 percent, while wages have increased only 19 percent and inflation 17 percent.

To make matters worse, the survey found that among firms offering coverage, 45 percent were very or somewhat likely to increase their employees’ share of premium costs next year, 37 percent were likely to increase deductibles, 42 percent would probably increase cost-sharing for doctor’s office visits, and 41 percent would probably require employees to pay more for prescription drugs.

The rising cost of health insurance has spawned a steady decline in the number of firms that offer it, a rise in the number of uninsured Americans and a generation of workers whose earnings simply can’t keep pace with the cost of coverage.

“The gap between premiums and wages is widening and is actually at its widest point since 2001. That’s why people are really feeling the pain,” said Drew Altman, president of the Kaiser foundation, a nonprofit educational group.

Altman said the modest slowdown in premium growth is likely the result of high profits for insurance companies, solid hospital revenue, lack of expensive new blockbuster drugs and reduced medical spending resulting from greater cost-shifting to patients. The last period of similar declines came during the height of managed care from 1989 to 1996.

He said history suggests the slower growth of premiums isn’t likely to last.

“Since we’ve done little or nothing as a country to deal with the underlying drivers behind rising health care costs, there’s absolutely no reason to believe that these somewhat slower rates of increase are permanent. The really bad news is that we should expect at some point the rate of increases to return again to even higher numbers.”

The average cost for family coverage in 2007 is $12,106, up from $11,480 last year. That’s more than a year’s salary for a full-time minimum-wage earner and about the cost of an economy car, Altman said.

Individual coverage averages $4,479, compared with $4,242 in 2006.

About 60 percent of employers offered health insurance in 2007, similar to 61 percent in 2006, but lower than the 69 percent in 2000.

The decline is driven mostly by smaller firms with three to 199 workers. Among firms with three to nine workers, only 45 percent offered health coverage in 2007, compared with 57 percent in 2000. Offer rates among employers with up to 199 workers have fallen from 68 percent in 2000 to 59 percent this year.

While employers pay the bulk of insurance costs, the share paid by covered workers in 2007 was about the same as in previous years – 28 percent for family plans and 16 percent for individual coverage. On average, covered workers pay about $3,281 a year for family insurance and about $694 annually for single coverage.

The annual survey, released each year as workers begin open enrollment in health plans, is widely considered the nation’s best measure of employer-based coverage.