Wednesday, September 14, 2005

Employer Health- Care Costs Rise 9.2%

Employer Health-Care Costs Rise 9.2%
By VANESSA FUHRMANS Staff Reporter of THE WALL STREET JOURNALSeptember 15, 2005; Page D2

Employers are facing a 9.2% increase in the cost of providing health care to employees this year, pushing the premium for an average family health plan above the annual salary for a minimum-wage worker, a nationwide survey shows.
The 2,995-employer survey, conducted by the Kaiser Family Foundation and Health Research and Educational Trust, is considered an authoritative barometer of U.S. company health-care costs. It contains one glimmer of good news: After four years of double-digit increases in health-insurance premiums, the average increase has fallen below 10%.
But this year's jump is still three times bigger than the average increase in workers' income and nearly triple the inflation rate. Since 2000, employers' premiums have climbed 73%, bringing the average annual premium for family coverage to $10,880.
That makes a family premium more expensive than the $10,712 a full-time minimum-wage worker earns in a year. Given that the average worker pays 26% of those annual premiums, or $2,713, the cumulative rise in health-care costs have made it all but impossible for many low-income workers to afford company-sponsored coverage. Indeed, the share of workers covered by health insurance through their own employer fell to 60% in 2005, compared with 63% in 2000, the study's authors said.
"It is the low-wage workers who are being hurt the most by the steady drip, drip, drip of coverage draining out of the employer-based health-insurance system," said Drew Altman, president of the Kaiser Family Foundation, a nonprofit health-policy research group based in Menlo Park, Calif. The foundation surveys employers every year between January and May, asking how their current premiums compare to a year earlier.
More businesses, mostly smaller ones, are dropping health benefits altogether. The percentage of firms offering health insurance to their workers dropped to 60%, down from the 66% in 2003 and 69% in 2000, the study said.
Few employers with more than 200 workers have dropped health coverage, the Kaiser study reports, but they do continue to reduce benefits or shift more of the costs to employees. Another employer survey published this week, by employee-benefits firm Mercer Human Resource Consulting, found that companies are becoming more determined to hold down cost increases.
"Many are saying they've set a target of mid- to high-single digits as their threshold of pain," said Blaine Bos, a senior Mercer consultant and one of the study's authors. The 1,883 employers Mercer surveyed said they expect to bring next year's average health-care cost increase down to 6.4%, but only by raising employees' premiums and deductibles and introducing measures such as programs that manage costly diseases such as diabetes, hypertension and other chronic illnesses.

Write to Vanessa Fuhrmans at


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