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The High Cost of Health Goes Higher

The price of health insurance is soaring, says new study

FRIDAY, Sept. 14, 2001 (HealthDayNews) -- If health-care costs went through the roof years ago, they now seem to have reached the stratosphere.

A new survey by the Kaiser Family Foundation and the Health Research and Educational Trust finds that premiums for employer-sponsored health insurance, which covers two of three Americans, increased an average of 11 percent in 2001, the largest increase since 1992. Overall inflation during the same period was only 3.3 percent.

The survey of 2,734 firms, ranging in size from three to more than 300,000 employees, says average annual premiums shot up to $2,650 for single coverage and to $7,053 for family coverage between the spring of 2000 and the spring of 2001. That translates into average monthly premiums of $221 for single coverage and $588 for family coverage.

Not surprisingly, the smallest firms (three to nine employees) had the highest average increase (16.5 percent). Firms with three to 199 workers had an average increase of 12.5 percent (versus a 10.3 percent increase in 2000), and large firms experienced a 10.2 percent increase (compared with 7.5 percent in 2000). Premiums were highest in the Northeast and lower in the West.

What's driving the increase? "We see it as a combination of forces," says Joe Luchok, spokesman for the Health Insurance Association of America, a trade group representing the private health care system. One is drug costs that the study says rose an average of 15.5 percent last year. There's also a shift away from Health Maintenance Organizations (HMOs) and towards the more expensive but less restrictive Preferred Provider Option (PPOs). Among other differences, HMOs require people to use specific doctors; PPOs are networks of doctors and hospitals that charge members less for services.

Other factors include the rising costs of medical technology, government requirements that employers offer more choices to employees, higher spending for hospital and physical care and higher insurance profits.

So far, employers still are assuming most of the cost burden, but that probably won't last. Three-quarters of the large companies and 42 percent of the smaller businesses surveyed reported they are "very" or "somewhat likely" to increase employees' contributions for health insurance in the next year.

"By next year, employers will pass along increases to workers and will have to pay more out of pocket," says Jon Gabel, vice president of Health Research and Educational Trust and the study's lead author. "Many younger and lower-income workers will not find coverage." The number of uninsured probably will rise as well.

Employers already have shifted some of the burden to their workers in the form of higher deductibles and co-payments. The survey says employees contributed an average of $30 a month for single coverage and $150 for family coverage. The average deductible for non-preferred providers in PPOs rose from $361 last year to $407 this year. Average co-payments for non-preferred brand name drugs jumped from $16 to $20.

The problem may go way beyond insured and uninsured. "To me, this increase is just part of the larger issue, which is that we don't have an adequate delivery system for health insurance. Thirty percent of the work force is not working for an employer in the traditional way," says Sara Horowitz, founder of Working Today, a national nonprofit organization that represents the concerns of America's independent workforce. "We're just going to see costs going higher and higher and insurance companies pulling out of the individual market more and more. We have to be focused on ways to end this death spiral."

What To Do

For more information on health insurance and health insurance trends, visit Working Today or the Health Insurance Association of America.

For more information on the new study, visit the Kaiser Family Foundation.

SOURCES: Interviews with Joe Luchok, spokesman, Health Insurance Association of America; Sara Horowitz, founder, Working Today; Jon Gabel, vice president, Health Research & Educational Trust; Kaiser Family Foundation Report, 2001 Employer Health Benefits Survey
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