Employee health costs rise painfully fast

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The San Diego Union Tribune

Employee health premiums in 2003 rose by a double-digit amount for the third straight year, according to a survey of employers released yesterday.

This year alone, the price of private health insurance surged 13.9 percent on average nationwide, according to the survey by the Kaiser Family Foundation and the Health Research and Education Trust.

Employees are paying almost 50 percent more to insure their families than they did three years ago. The typical family policy now costs $9,068, with employees picking up about 27 percent of the cost, and employers the rest. It costs less, $8,563, in the 13 western states due to managed care penetration. But at the same time, the western part of the nation saw the biggest increase in premiums overall, 16.3 percent over a year ago.

The survey, the fifth to be conducted jointly by the two organizations, was done between January and May and included 2,808 private and public firms ranging in size from three employees to more than 300,000. In addition to noting the largest premium increase since 1990, the survey also found that employees’ out-of-pocket costs when obtaining medical care are on the rise in terms of higher deductibles and co-payments for office visits and prescription drugs.

The biggest factors behind the increases are the rising costs of prescription drugs and hospital services, said Gary Klaxton, vice president of the Henry J. Kaiser Family Foundation, which is not affiliated with the Kaiser Permanente HMO. More advanced prescription drugs and new treatments cost more, he says, and these costs are passed along to consumers.

“Now you have stents with medicine (on them), and they are three times more effective, but they are more expensive,” Klaxon said. Also, he added, as managed care has loosened in recent years to allow for less pre-authorization and more self-referral, this has increased usage.

“Some of the things that retarded service are going away,” he said.

Steven Tough, president and chief executive of the California Association of Health Plans, says the industry is also trying to play catch-up after a period of premiums being kept artificially low.

“You had a period of time where premium rates were declining,” he said. “Now we are in recovery mode. The insurance companies are trying to be sure they are financially strong.”

Some consumer advocates say neither this nor increased health-care costs are sufficient reasons for such drastic premium hikes.

“While health-care costs are soaring, premiums are increasing at a much greater rate,” said Jerry Flanagan, health-care advocate with the Foundation for Consumer and Taxpayer Rights, who added that almost every publicly traded HMO has recorded a profit increase in the last two quarters. “Health plans are spending more on profits and overhead. Consumers are left to pay the bill.”

Whatever the reason for the higher premiums, local employers aren’t happy to be paying them.

“It’s just crazy what is happening,” says Kristi Parnell, director of human resources for Waxie Sanitary Supply, which employs 625 people, 160 of them in its San Diego headquarters. The company switched health plans in January to reduce costs, trading Blue Cross coverage for a more bare-bones product from Blue Shield.

Employees now have higher co-payments for prescriptions, for example. The company has not increased the percentage of the cost employees must pay for their coverage, like the majority of the companies surveyed. But since premiums are higher, employees are paying more anyway.

Bob D’Angelo, first vice president of San Diego-based Driver Alliant Insurance Services, an employee benefits insurance brokerage, said some of his clients’ employees have fared worse than those at Waxie.

“Some companies are increasing the percentage employees have to pay, or passing along the entire cost of the increase,” he said.

Few companies reported they would be dropping health benefits overall, but many said they were willing to consider changes to their health plans, with 62 percent saying they had shopped around for other options, although only about a third have actually changed plans.

The study found that those who have dependents are hardest hit in some companies.

Jeanine Wilson, controller and bookkeeper for Anchor Construction Specialties, has her Kaiser health benefits covered through work but has to pay for her family. The increase in recent years has been staggering: She says she paid about $380 for a family of four three years ago, but now she pays close to $700.

“The amount that it has risen to is ridiculous,” she said.

Klaxton said there is no end in sight to the increases, though some employers — and specifically, more large employers — are looking into offering high-deductible plans, which are relatively inexpensive. But it’s hard to tell if they will become popular, since they place greater financial responsibility on consumers.

Wilson, whose daughter has epilepsy and requires frequent medical care, said she wouldn’t even consider such a plan.

“It’s not an option for us,” she said.

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