Employer health costs rise 9.2%

Average increase of less than 10% is first in past five years for U.S.

Number of companies offering coverage falls

Survey finds workers paying more

deductibles, co-payments also rise

September 15, 2005|By M. William Salganik | M. William Salganik,SUN STAFF

WASHINGTON - For the first time in five years, employer costs for health insurance didn't increase at a double-digit rate this year, according to a national survey released yesterday.

At 9.2 percent, the rise in cost wasn't much below the double-digit marker, and was more than triple the growth of workers' wages. And the percentage of employers offering health coverage continued to tick downward, to 60 percent - from 63 percent last year and 69 percent in 2000, according to the random survey of more than 2,000 employers.

Workers, too, paid more - an average of $226 a month this year for family coverage, up from $149 in 2001, even though their percentage share of the premium cost has held steady over time. Many also paid more in higher deductibles and co-payments.

That meant that while there was slight cost moderation, "the bad news is that that's the only good news," said Drew Altman, president of the Kaiser Family Foundation, which conducted the survey along with the Health Research and Educational Trust (HRET).

Experts don't expect the slowdown in the rate of increase to continue. "We've seen these dips before, but the rate of increase in health care costs always bounces back," Altman said.

R.F. Warder Inc., a heating, air conditioning and plumbing contractor in White Marsh and one of the employers surveyed, got hit with an above-average 12.6 percent rate increase. Office manager Deborah Hammond said the company's monthly cost for family coverage jumped to $1,209.70, up from $1,074.42 a month last year.

She said the company still pays the full cost, in part because only two office employees are covered. About 50 others participate in the Plumbers and Steamfitters union plan, for which the company makes a negotiated contribution. "If we had more people under this policy, we would have to charge them," Hammond said.

Larry Helminiak, who founded Carroll Insulation in Eldersburg and ran it until last fall (when he officially retired, although the business is still in the family, and he still stops in), said his company used to pay the full cost of health coverage. But, he said, 20 years ago the cost for family coverage was only $68 a month. Now, it's $768, and the employee has to pay 25 percent. The company has 50 to 70 employees, depending on the season and on work flow, he said.

Health costs, Helminiak continued, "are intolerable, and what's going to happen is that employers' only choice will be to either eliminate coverage or increase what the employee pays."

Large employers have more freedom to control costs by modifying benefits or by adding programs to help employees with chronic diseases, such as asthma, to manage their conditions.

Tracy Watts, a principal with Mercer Human Resource Consulting who advises employers in the Baltimore-Washington area about health benefits, said some of her clients have found that disease management is "starting to show results" in holding down costs. She said most of her clients are getting price quotations for next year with increases of about 12 percent, but are able to bring that down to 10 percent or so through negotiations and cost shifting to employees.

For example, she said, "a couple of my smaller clients who had held onto the $10 office visit co-pay are now thinking of switching to $15." The Kaiser/HRET survey found that the $15 co-pay was the most common this year, and the number of workers who pay $10 had dropped from 37 percent to 29 percent.

Wellness programs

She said large employers are launching a variety of "wellness" programs, such as smoking cessation, and are starting to think about charging smokers more than nonsmokers.

But small businesses don't have the same latitude.

"Small employers don't have a lot of choice," said Mark Sucoloski, managing partner of Blakefield Insurance Group, a brokerage in Rosedale. "I'm just trying to find them carriers that will give them a better price. It becomes a spreadsheeting issue."

Helminiak said he has sometimes switched insurance carriers, but that upsets employees because each insurer has a different network of participating physicians. "You switch carriers and everyone throws themselves on the floor and screams because they might have to change doctors," he said.

Still, the Kaiser/HRET survey found that 60 percent of small employers (with less than 200 workers) shopped for a better price last year, and 24 percent did switch carriers. The survey also found it was mostly small firms that dropped coverage. And of firms that don't offer health insurance, 73 percent said price was a "very important" factor in making the decision.

The survey also showed a continued trend in shifting costs to patients through co-payments and deductibles.

The average deductible - the amount the patient pays before insurance coverage kicks in - increased 12.5 percent this year, to $323, for preferred provider (PPO) coverage, the most popular type of insurance.

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