No easy solutions to continued rise in health premiums

WASHINGTON, D.C.-Employers continue to experience double-digit premium hikes, but they have few proposals for solving the healthcare cost crisis, according to a recent employer survey. This situation is making health insurance increasingly unaffordable to many Americans. Even though premiums rose "only" 11.2% on average in 2004-vs. 13.9% last year-that increase still far exceeds the rate of inflation (2.3%) and rise in workers' earnings (2.2%) for the current year. In fact, the cost of health insurance has jumped 59% since 2001, prompting fewer employers to offer coverage and fewer workers to pay for health benefits when offered, notes Jon Gabel, vice president of the Health Research and Educational Trust (HRET).

A survey of about 3,000 large and small employers sponsored by HRET and the Kaiser Family Foundation (KFF) found that the average PPO premium for a family of four hit $10,217 this year. HMO premiums averaged a "low" $9,504, but that still is unaffordable for many families, which now have to contribute an average $2,661 a year to employer-provided health coverage.

PPOs continue to be the most common form of health coverage, serving more than half (55%) of all employees with health coverage. Slightly more workers (25%) enrolled in HMOs this year, possibly because of lower premiums and out-of-pocket costs.

Employers also are switching insurers in their search for less-costly coverage. More than half (56%) of firms shopped for a new plan this year, and about one-third made a change. But with little overall shift in type of plan coverage, most employers end up more or less where they started, the survey indicates.

With inflation and wage rates remaining low, the public is unlikely to accept continued hikes in health costs. If premiums continue to rise, Altman notes, payers will be looking more closely to see if such increases merely reflect higher HMO and insurer profits than actual provider costs.