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Health care costs soar for families

/ Source: staff and news service reports

Health care premiums for families soared at their highest rate in more than a decade this past year, driven by steeper doctor and hospital fees and health insurers’ profit gains, a new study found.

Politicians please take note: Americans fret more about losing their health insurance than being a victim of a terrorist attack, according to the results of a poll released Tuesday.

That’s among the findings of the survey showing health care premiums climbing at their highest rate in more than a decade, driven by steeper doctor and hospital fees and health insurers’ profit gains.

Monthly premiums for employer-sponsored health care in the United States jumped by 13.9 percent between spring 2002 and 2003, the sharpest spike since 1990, according to a survey by two health research organizations, the Kaiser Family Foundation and the Health Research and Educational Trust.

Annual family premiums increased to $9,068 this spring, according to a survey of 2,808 companies.

Experts were not surprised by the rise because employees have shunned the restrictive policies of managed care plans, which sought to reduce costs, while they still demanded the newest, most expensive drugs and procedures.

“The key finding is not a surprise but that doesn’t mean it is not important,” said Drew Altman, president of the Kaiser Family Foundation. “This is more bad news for employers and working people.”

With no new strategies employers believe will substantially reduce costs, the trend of bigger health care spending is expected to continue.

“There is no let-up in the rate of increase in health care costs,” said Altman, adding that employers and consumers feel hopeless about it. “We’re stuck without a big answer.”

Small firms hit hardest

Costs paid by workers out of their own pockets for prescription drugs and doctor visits jumped by at least 50 percent in just the last three years, the report found.

At the same time, the poll found that 33 percent of the insured worry that their income might not keep up with health premiums, while only 8 percent said they fear being a victim of a terrorist attack, the poll found.

Small firms, with three to nine workers, faced the largest increase with a 16.6 percent surge in premiums. Mid-sized companies with between 200 and 999 workers had the smallest increase with a 12.4 percent growth rate.

The portion of the premium paid by an employee for family coverage grew 12.9 percent to $201 a month, or $2,412 annually, while the amount a single employee paid for a policy rose 7.6 percent to $42 a month or $508 a year. Employers paid the remainder of the $3,383 premium for a single coverage.

Spending on health care is set to hit 17.7 percent of U.S. gross domestic product by 2012, up from 14.1 percent in 2001, according to government estimates.

And as the baby boom generation retires, the numbers on Medicare will swell. That’s driving Congress to debate adding coverage of prescription drugs to Medicare, the federal insurance program for 41 million elderly and disabled.

On a brighter note, Altman said companies are not dropping coverage despite rising costs and a poor economy. The survey found that 66 percent of companies provide health care coverage, the same as last year.

The percentage of premiums paid by employees is substantially unchanged over the last two years, at 16 percent for single coverage and 27 percent for family coverage.

Altman doesn’t view this as a victory for workers, however.

“From the point of view of a consumer the 16 percent is meaningless. They are still paying a lot,” Altman said.

HMO profits

Premiums are rising a bit less rapidly at big companies that take on the risk of health insurance themselves, so-called self-insured employers like General Electric Co.

That finding suggests “part of the rise in health care premiums is due to insurers expanding their underwriting gains,” Altman said.

Nearly every publicly traded HMO posted record profits in recent quarters, as they keep raising premiums to cope with underlying cost drivers — prescription drugs, hospital and doctor fees.

But Altman cautioned against casting HMOs as villains, noting they are just playing “catch-up” from an early period when premiums trailed cost increases.

The real culprit, not going away anytime soon, is the forward march in pricey medical technology — which brings with it rapidly escalating costs, Altman said.

Employers are shopping around for new options. The survey found that 62 percent sought a new health plan, but only 33 percent changed. Experts say that’s because employers don’t want to put administrators and workers through the hassle of switching plans unless savings are assured.

Wurth Group of North America is currently shopping for a new plan for its 2,325 employees after its premiums rose 20.5 percent this year, atop a 21 percent jump in 2002.

“It is a hassle to change plans so the savings have to be material,” said Gerald Rudick, vice president of human resources of the New Jersey-based maker of fasteners, bolts and screws. “I’m not sure what the magic saving number is - is it $100,000, $1 million? We just don’t know.”

The poll results were based on a telephone survey conducted from January to May.

The Associated Press and Reuters contributed to this report.