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Health care math: Costs up, benefits down, wages lag

WASHINGTON — After modest increases last year, the cost of job-based health insurance for families and individuals has jumped sharply this year, even though insurers are paying less in benefits as cash-strapped American workers opt for less medical care.

For the estimated 150 million workers with employer-sponsored coverage, the average cost of family health insurance jumped 9 percent this year to $15,073, while the price of individual coverage rose 8 percent to $5,429.

Both increases are the largest since 2005. Each far outpaced a national 2 percent hike in wages and a 3.2 percent rise in inflation, according to an annual survey of nearly 2,100 businesses that the Kaiser Family Foundation and the Health Research & Educational Trust released Tuesday.

Premiums for family and individual coverage had increased only 3 percent and 5 percent, respectively, in last year's survey.

"We don't know if this is a one-time jump and premiums will go back down again next year or whether we're entering a period of higher increases. We really don't know, and we won't know until next year," said Drew Altman, the president and CEO of the Kaiser Family Foundation.

What is clear is that family coverage premiums have climbed 113 percent since 2001, compared with a 34 percent rise in workers' wages and a 27 percent increase in inflation over the period.

Employers still absorb the bulk of insurance costs. They pay an average of 72 percent, nearly $11,000, toward the cost of family coverage. Workers pay about 28 percent, an average of $4,129. For single coverage, workers pay about 18 percent, or $921, in premiums, while employers pay the rest, about $4,508.

The rising costs are why more employers and workers are opting for cheaper, high-deductible health plans that require patients to pay $1,000 or $2,000 in medical costs before their coverage kicks in. The survey found that 31 percent of covered workers are in high-deductible plans, up from 10 percent in 2006.

Karen Ignagni, the president of America's Health Insurance Plans, said the increasing cost of medical care was the main culprit behind the rate increases. Rising medical costs also helped pave the way for the landmark 2010 Affordable Care Act, which overhauled the nation's health care system.

But Altman said that this year's higher premiums, which were set last year, also might reflect insurers' expectation of a stronger economic recovery this year, with more patients presumably seeking more services.

Other insurers may have set rates higher this year thinking that the Affordable Care Act would increase their costs. But analysis by Kaiser and the federal government found that provisions in the new law enacted last year probably accounted for only 1 to 2 percentage points of this year's premium increases.

"In the end, both assumptions were wrong — but insurance companies still charged high premiums and earned impressive profits," said a blog post Tuesday by Nancy-Ann DeParle, assistant to the president and the White House deputy chief of staff.

Barclays Capital also reported that 13 of the 14 top health insurers beat their projected earnings for the first quarter, with profits averaging more than 46 percent higher than expected.

SEATTLE — Jerri Wood, a 59-year-old married mother of three living in Renton, Wash., was diagnosed with a brain tumor in 2002 and had to undergo surgery and radiation. As technicians for a telecommunications utility, Wood and her husband were covered by a health plan that paid nearly all the costs: Out of an $80,000 hospital bill, she estimates she paid $500 herself.

But in 2005 the company, which had previously paid workers' premiums entirely, began requiring them to contribute. For the Woods, that now adds up to about $180 month. Wood must also pay a $150 deductible for diagnostic procedures. On top of that, she faces a 10 percent co-insurance charge.

The twice-annual MRIs Wood must get to monitor a section of the tumor that surgeons could not remove now cost her $1,000 apiece. Wood estimates her family will spend more than $6,700 on health care in 2011.

The family's pretax income has dropped to about $60,000 since Wood took early retirement to deal with her health problems.

"We didn't take a vacation this year. You cut back on gifts. I didn't get a haircut for 18 months," Wood said.

"These sort of things sound like vanity. But if you don't look good, you don't feel good. If you're fighting a chronic illness like this and you're constantly trying to get the bills paid, well, that's really hard."

Washington Post

9%

Average increase for a family this year

8%

Average increase for an individual

72%

Or $11,000 paid by employers to cover a family annually

28%

Or $4,129 paid by workers to cover a family.

Health care math: Costs up, benefits down, wages lag 09/27/11 [Last modified: Tuesday, September 27, 2011 11:35pm]
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