From foodconsumer.org
Health Insurance Premiums Outpace Inflation and Wage Growth
By Kathy Jones
Sep 27, 2006, 13:03
27 Sep, (foodconsumer.org) - Health insurance premiums for employer-sponsored plans continued to peak with a 7.7 percent rise in 2006, according to a comprehensive report by the Kaiser Family Foundation. Although this rise in the insurance premiums was the slowest since 1999, it was still more than double the overall inflation rate.
The cost of healthy living has increased steadily over the last few years. While marginal increases are to be expected, health insurance premiums are soaring well above the increase in the incomes of workers. The 7.7 percent rise in the premiums to $11,481 means that employees have to increase their contributions for family coverage to $2,973 annually.
The Employer Health Benefits Survey said that insurance premiums have declined consistently for the last three years. But comparatively wages rose by only 3.8% and inflation increased 3.5%. In the past six years health insurance premiums have risen by 87 percent overall, while the wage increase is a mere 20 percent, the survey said.
“The cost trend is moderating but nobody is celebrating,” said Drew Altman, president of the Kaiser Family Foundation. “Businesses and workers are still being slammed year after year by rising health costs.” The growth in insurance premiums is hitting both employers as well as employees.
Despite the fact that 60 percent of employers still offer attractive health insurance packages for their workers, the growth in premiums is making it increasingly tough to sustain these plans over a log period of time.
In order to make health coverage cost-effective, employers are placing restrictions of which family members are covered. Workers are being forced to fork out substantial contributions to the health coverage plans before they cna claim insurance.
Health savings accounts, which were thought to be the answer to rising medical costs grew slowly this year as employers consolidated their plans rather than venture into new ones. The preferred provider organization plan, which is the most common type of health insurance cost $11,765 for a family and $4,385 for single employees.
The survey said that workers were contributing $259 more this year toward the cost of family coverage as compared to 2005 figures. Employees in small firms contributed even more heir premiums than employees at larger companies, the survey added.
Over 2.7 million workers were enrolled in high-deductible health plans with a savings option. Overall 4 percent of covered workers have plans such as a health savings account (HSA), the report said.
Gary Claxton, vice president of the Kaiser Family Foundation said that many employers also contribute to the savings accounts that average $743 for single workers' HSAs or HRAs and $1,359 for family coverage.
"If you consider these in the cost of the plan, the difference between the consumer-driven plans and PPOs essentially disappear," he said. "Only about a little more than a third of employers that offer an HSA-qualified plan do not make a contribution to the account. That means they're cheaper, but the employee gets less."
"We don't know yet whether workers and employers ultimately will embrace consumer-driven health plans in big numbers, but it certainly hasn't been a tidal wave," he added
But many companies are now forced to withdraw insurance coverage from their work packages. The number of Americans without coverage has jumped 23 percent since 1987.
The US has the world's most expensive health-care system. Over the years the costs have multiplied tremendously. In fact in 2004 the total national health expenditures were three times as much as the prevailing rate of inflation!
A study published in the New England Journal of Medicine last month said that increased life expectancies vindicate the high healthcare spending in the US. The study by Harvard researchers reckons that the health care system has provided good returns for Americans if only by prolonging lives. Decreased rates of smoking and fatal accidents also have a lot to do with longer lives, but the health care system must also be given credit.
For example a baby born in 2005 could expect to live to a ripe old age of 78 years as compared to 68 for a baby born in the 1960s. In 1960 the US spent just about $700 per person. In 2005 the medical costs rose to over $6,000 per person.
However the rising costs of health care is one reason a lot of people remain uninsured. A recent study by the Trust for America's health found that 46.6 million Americans remained uninsured in 2005.
Health insurance premiums are mainly rising due to the increased cost of preventive treatment. Dr. Jay Bhattacharya, a researcher at Stanford Medical School told The New York Times, that preventive care like controlling diabetes and reining in cholesterol levels was also high. However patients do live longer with increased medical costs.
“When I make this point, people accuse me of wanting people to die earlier. But it’s exactly the opposite,” Dr. Jay Bhattacharya, said. “If these expenditures are keeping people alive, it’s money well spent.”
Uwe Reinhardt, a health economist at Princeton University said that the result of high medical costs as well as premiums means that low-wage workers are being booted off the health coverage map. "That's the bottom line here," Reinhardt said.
Karen Ignagni, President and CEO of America's Health Insurance Plans, acknowledged that reforms were needed. "Regulators need to allow more flexible benefit designs so consumers and employers can find the coverage that best meets their needs," she said. "Finally, all health care stakeholders should collaborate to ensure that patients receive care that is safe and based on the latest scientific evidence."
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