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Health insurance coverage getting skimpier

Health insurance premiums rose a modest 5 percent this year for coverage that's getting skimpier, researchers say.
/ Source: The Associated Press

Health insurance premiums rose a modest 5 percent this year for coverage that's getting skimpier, researchers say.

The 5 percent increase was comparable to last year's uptick. Overall, premiums for family coverage increased to $12,680 and premiums for single coverage increased to $4,704, according to the Kaiser Family Foundation and the Health Research and Educational Trust. Employers pick up, on average, about three-quarters of that cost.

Over the past decade, insurance premiums have grown much more quickly than wages and inflation. That wasn't the case this year. But to help slow the costs of health insurance, companies are increasingly offering coverage that requires their workers to pay more of their medical expenses before the insurance will kick in.

In just one year, the percentage of workers enrolled in high-deductible insurance of $1,000 or more jumped from 12 percent to 18 percent.

"We may be seeing the tip of the iceberg of a trend towards less comprehensive, skimpier health insurance coverage for many working people," said Drew Altman, president and CEO of the Kaiser Family Foundation, which conducts health research.

The shift toward high-deductible insurance was most dramatic for workers in small businesses, where more than one in three covered workers must pay at least $1,000 out of pocket before their plan will start to pay a share of their health care bills. Generally, the more liability customers assume for their health expenses, the less insurers will charge them.

Often, high-deductible plans are coupled with health savings accounts. Consumers that enroll in such plans can set aside money on a pretax basis and then use the savings to help pay for some of their medical expenses. Also, the accounts can be used to help pay for retirement.

The Bush administration has aggressively pushed the accounts as a way to lower health inflation and make consumers smarter shoppers. Altman said the Kaiser survey released Wednesday shows more companies opting for health saving accounts. But a bigger trend was the movement toward high-deductible plans with no savings component.

Northtowns Orthopedics of Buffalo, N.Y., made the transition to a high-deductible plan with a health savings account about three years ago. The company also contributes to an employee's savings account — enough to cover 70 percent of the insurance plan's deductible.

"We were in double-digit increases every year leading up to the decision to move," said Joel Farwell, Northtowns' administrative executive. "The costs for our local HMOs was basically a runaway train."

Many workers didn't like the move, particularly those with higher medical expenses, but Farwell said he's certain most of them have saved from the move and get better health care. The company saved about $4,000 per family as a result of the change to high-deductible insurance.

The vast majority of the nation's 46 million uninsured work for small businesses. This year's survey showed about 62 percent of firms with fewer than 200 workers offer a health insurance benefit. Meanwhile, 99 percent of large businesses offer coverage, a number that has barely budged over the past decade.

"We're just seeing two very different stories, one for small employers, one for larger ones, with smaller employers increasingly offering benefits that look more and more like the benefits people get in the individual marketplace," Altman said.

In the individual marketplace, consumers purchase coverage directly from a company. Such plans are regulated by the states, and many people with pre-existing conditions have a hard time buying coverage on the individual market.

Over the long haul, premiums have increased 119 percent since 1999. Workers' earnings increased 34 percent during the same period and overall inflation increased 29 percent.

Altman said the 5 percent increase is unusually low, but it's not going to last.

"The one thing that's very clear is we haven't done anything to change the fundamental drivers behind increases in health care costs," Altman said. "So, at some point, the rates of increases in health care costs will rise again to levels we've seen in the past."

In a separate report released Wednesday, a survey of leading employers indicates that their health care expenses are expected to increase about 6 percent next year — to $9,660 per employee, according to Towers Perrin, a firm that specializes in improving company performance.

The survey indicates that more firms are having success in holding health care costs below general inflation, a rarity just a few years ago. Those firms are placing more emphasis on managing the health of their work force by paying for such things as smoking cessation and subsidizing gym memberships. They're also helping workers better manage diabetes and other chronic conditions so that they can avoid hospitalizations and other expensive treatments.