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Paper: Los Angeles Times (CA)
Title: The Nation
Rising Premiums Threaten Job-Based Health Coverage
Date: September 15, 2005
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.
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.
Although Congress has passed some limited healthcare measures, such as
a new Medicare prescription-drug benefit, efforts to revamp the system
have failed. Meanwhile, the number of Americans without health
insurance continues to grow, with the Census Bureau reporting last year
that the number of Americans without coverage grew to a record 45
million.
Among workers who are taking action on their own is Christie Apostolo,
29. She and her husband decided this spring that they had to stop
spending $800 a month through her employer to cover the couple and
their two young children if they ever were going to save enough for a
house with their combined annual income of $82,000.
Through an online insurance brokerage firm, she found a $498-a-month
plan with Woodland Hills-based Health Net Inc. Her new plan has a $30
co-pay to see a doctor four times a year, vision and dental coverage,
and a $500 deductible -- far less than the $2,500 deductible in her old
plan.
"It's a couple hundred dollars a month we saved, but that's groceries
for the week," said Apostolo, who lives in Pacific Grove, Calif.
As more Americans like Apostolo become responsible for their own
healthcare choices and costs -- much as workers have become responsible
for their retirement with the shift from company pensions to 401(k)
plans -- businesses that cater to them are profiting.
Among them is Encino-based Answer Financial Inc., an online broker that
sells all kinds of insurance. Healthcare is one of the company's
fastest-growing lines of business.
Answer Financial's clients include the self-employed, the unemployed,
part-timers and even full-time workers who aren't eligible for their
employer-sponsored plans. Their customers increasingly include people
who are employed but either can't afford the premiums of their
employer-offered policies or are healthy enough to think they can get a
better deal somewhere else.
In the last year, the company has doubled the number of agents who sell
health insurance to 40 and plans to quadruple that number next year,
Chief Executive Alan Snyder said.
Extending the comparison to trends in retirement plans, Snyder
envisions a time when most employers will give defined contributions
instead of defined benefits -- putting responsibility for finding
insurance on the workers. He believes that healthcare plans will
eventually be similar to self-directed 401(k) plans that workers
control and take with them when they leave.
The trend "is very exciting for us," Snyder said. "Employers are going
to be saying, 'Here's so much money, you go pick the plan that is best
for you.' "
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Associated Press was used in compiling this report.
Author: Debora Vrana
Section: Main News
Page: A-1
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