Workers’ insurance burden grows

The cost of family coverage has risen four times faster than the rate of inflation since 1999.

McClatchy Newspapers

WASHINGTON — Premiums for job-based health insurance are up 5 percent in 2008 and have more than doubled since 1999, a growth rate that far outpaces inflation and the increase in workers’ wages over the same period, according to an annual survey of employers.

Meanwhile, a growing number of workers at smaller firms are getting less coverage for their money as health plans with high deductibles and fewer benefits become more prevalent.

The portion of workers with single coverage who pay a deductible of at least $1,000 has jumped from 10 percent to 18 percent in the past two years. Among smaller firms with three to 199 employees, the rate has more than doubled from 16 percent to 35 percent.

“We may be seeing the tip of the iceberg of a trend towards less-comprehensive, skimpier insurance with higher out-of-pocket payments for working people,” said Drew Altman, president and CEO of the Kaiser Family Foundation. “That’s bad news at a time when workers are being hit by other economic pressures from declining 401(k)s to higher food and gas prices and problems paying the rent and mortgage.”

On average, workers now pay $3,354 — about 27 percent — toward the $12,680 annual cost for family coverage, according to the survey of 1,927 public and private companies by the Kaiser foundation and the Health Research and Educational Trust.

Workers with single coverage pay about $721 a year, or about 16 percent of the $4,704 annual cost of their coverage.

Both rates are up about 5 percent from 2007, which is the slowest annual growth rate since the survey began in 1999.

However, soaring health-care costs continue to hurt both employers and workers. The overall cost of family coverage has increased 119 percent since 1999; that’s roughly four times faster than the rate of inflation — 29 percent — over the same period. It’s more than three times faster than workers’ earnings, which have increased 34 percent in the last nine years.

About 158 million people are covered by employer-sponsored health plans. Most large companies with more than 200 workers provide health coverage, and 62 percent of smaller firms do.

IM Construction, a Sacramento, Calif., home builder with 135 employees, is typical of smaller companies that are cutting their health insurance costs by switching to consumer-directed plans with high deductibles.

The company provided health coverage for each employee plus one additional person. But two years ago, they began covering only the employee, said company controller, Jason de Lemos.

The company also switched their coverage from a Health Maintenance Organization to cheaper, high-deductible Health Reimbursement Accounts. In HRAs, employers provide money to help employees pay medical expenses. Once the money has expired, the employee picks up the additional charges.

IM pays employees’ $2,000 HRA deductible, and workers pay $15 a month toward the premium — a cost-cutting move implemented last year.

The changes have helped cut their health costs, both in terms of premiums and utilization, de Lemos said.

“The idea was to increase the level of cost-sharing, so that people only go to the doctor when they need to. In doing that, we were able to reduce our rates considerably, especially since we haven’t seen a rate decrease in eight years,” he said.

No coverage changes are planned for next year, but with the housing industry in the worst decline since the Great Depression, de Lemos said he’s glad the coverage changes were made two years ago.

“Because if we were doing it right now, it would be even harder on everybody because the industry we’re in is just having a hard time,” he said.

Other key findings from the survey include:

U31 percent of large companies with 200 or more employees provide retiree health benefits, down from 66 percent in 1988.

U14 percent of firms are “very likely” to raise employee premiums next year, and 12 percent are “very likely” to raise deductibles.

U58 percent of covered workers are in Preferred Provider Organizations, 20 percent are in HMOs, 12 percent are in point-of-service plans, 8 percent are in consumer-directed plans, and 2 percent are in conventional indemnity plans.