The Healthcare Squeeze Continues to Get Worse

The cost of employer-sponsored health insurance continues to outstrip inflation and wages, rising 6.1 percent this year, according to a closely watched annual report. And workers are bearing more of the burden.

The rate of increase is slower than in previous years, but since 2000, the share paid by the average U.S. worker has doubled. Moreover, the average total cost of healthcare premiums for a family of four, including the share paid by employers, now exceeds the amount a minimum wage worker earns in a year.

The slowdown in premium increases continues a four-year trend, according to the employer survey released Tuesday by the Kaiser Family Foundation and the Health Research and Educational Trust. The slowing represents a rare bit of good news in an otherwise "fraying" employer-based healthcare system, said Drew Altman, president of the Kaiser Family Foundation, a nonprofit research group in Menlo Park, Calif., that produced the report.

But to Glenn Melnick, a Rand Corp. economist and a USC professor of healthcare finance, "the news looks rosier than it really is."

"Because consumers are paying more of the costs out of their own pocket, this is more a story about costs shifting than costs really going down," he said.

Melnick pointed out that federal estimates see overall healthcare costs rising about 7 percent this year, meaning employees are picking up the difference between that figure and the rise in the cost of healthcare premiums.

The average annual premium was $12,106 this year for family coverage and $4,479 for single coverage, according to the Kaiser study, with workers contributing $3,281 and $694 of those totals, respectively. Those worker contributions are up by 10 percent and 11 percent over the amounts reported last year.

Premiums for family coverage have increased 78 percent since 2001, while wages have risen 19 percent and the cost of living has climbed 17 percent.

In addition to rising premium costs and plan deductibles, 95 percent of covered workers are now responsible for copayments and shared costs for hospital stays, outpatient surgeries and out-of-plan services.

Most Americans are feeling the pressure, but lower-paid and middle-class workers are experiencing a disproportionate pinch.

Increases in health insurance premiums and out-of-pocket expenses are often the same across the board no matter how much an employee makes, so already-strapped workers are struggling harder to make ends meet.

The most recent census data show that 14 percent of those without insurance make $25,000 to $50,000 a year. A recent California HealthCare Foundation survey found that 17 percent of Californians could not pay one or more medical bills in the last year.

The increased cost shift to workers coincides with a number of other financial pressures. The stock market has been volatile. Home prices are falling in some places and it is becoming harder to get home loans and some other types of credit. And prices for such family expenses as food and college tuition continue to rise at surprising clips.

Some employers are capping the amount they spend on health coverage, meaning they're no longer increasing what they contribute to an employee's plan. In that case, employees pay for all future rate increases.

A smaller percentage of companies are offering insurance. According to the Kaiser survey, the percentage of firms offering health insurance has fallen to 60 percent this year from 66 percent in 1999.

Gary Claxton, vice president and director of the Kaiser Family Foundation's Health Care Marketplace Project and a report coauthor, said Tuesday's survey did contain some good news, at least for those who are holding on to their coverage.

Insurers appear to be moderating their premium increases in response to greater competition in the market as the overall number of insured workers falls. Insurers "are in a fight for market share in a shrinking market," he said. "They realize they must moderate their prices."