Health plan costs jump 11%

WASHINGTON - Health insurance costs posted their fourth straight year of double-digit increases in 2004, pushing the total price tag on the most popular family coverage plans past $10,000 for the first time, according to a national study released yesterday.

Premiums for employer-sponsored plans rose 11.2 percent, according to an annual survey of employers conducted by the Kaiser Family Foundation and the Health Research and Educational Trust. That marked a slight slowdown from the previous year, when premiums escalated 13.9 percent.

Still, over the past four years, health insurance costs have leaped 59 percent - about five times faster than both wage growth and inflation.

With such sharp increases, the survey found, fewer workers have coverage - 61 percent this year, compared with 65 percent in 2001. For workers at small businesses, only half are covered, down from 58 percent in 2001. That means 5 million fewer jobs providing health coverage, the study estimated - partly because fewer small-business employers can afford to offer it.

"Health insurance is becoming unaffordable in our country, especially for small employers," said Drew Altman, president of the California-based Kaiser Family Foundation.

The $10,200 cost of coverage for a family in a preferred provider organization, Altman noted, is about as much as the pay of a minimum-wage worker. Of that premium, the employer, on average, pays $7,526, while the employee's share is $2,674.

"The increases have been steep," said Jeff Levin, general manager of Fields of Pikesville, a retail store selling cosmetics and greeting cards. The monthly premium for his employees, he said, rose about 25 percent this year to $422 from $335. He said he doesn't want to drop coverage, but is considering shifting to a plan that would require his workers to pay higher out-of-pocket costs with a health savings account.

Chris Cabey, who owns Cabey Insurance Agency in Hampstead, said one of his two employees - who had not previously elected health insurance - decided two weeks ago she wanted coverage.

"That's $180 a month less I take home," he said, adding that he's lucky that employee is 21 years old. "If it had been a 56-year-old, it would have been more than $700."

Experts attribute the sharp increases of the past four years to a variety of factors - looser controls over access to specialists, demands from hospitals and doctors for higher payments, the cost of new drugs and new technology and increasing need for care as the population ages.

And despite the slowdown from last year, health insurance costs are likely to continue to rise faster than wages.

"I see no scenario for the future that does not have health care costs continuing to outpace the growth in wages and, I would say, by a significant amount," Altman said.

Thomas Zingarelli, vice president of operations and warehouse manager at Pastore's Inc., a Baltimore food distributor, said his premiums have been going up roughly 8 to 10 percent a year over the past five years. He now pays $90 a week for family coverage, and the company kicks in another $90. He said 23 of the 33 workers at Pastore's are covered by the plan.

"It affects me a lot," said Zingarelli, who is married and has two children. "I think it is going to be a big political issue in the near future. ... If it keeps going up we eventually are not going to be able to afford it at Pastore's."

Sarah Mackey, a criminal court clerk at the Clarence Mitchell Courthouse in downtown Baltimore, said she and her husband are feeling the pinch of higher weekly premiums and no raises. Mackey, who has asthma, said she has little choice but to pay the increases.

"No matter how high they go up, we'll try to struggle with it," Mackey said. "We're not getting raises. And some people are just not going to the doctor like they should."

Baltimore area employers and benefits consultants said trends in the region track the national survey, and they expect more of the same in the coming year - a slightly slower, but still substantial, escalation in premiums.

Peter Cole, a senior vice president in the Baltimore office of Aon Consulting, which helps employers negotiate for health benefits, said as employers gear up for the fall open enrollment season, premiums are going up 8 to 9 percent for HMOs and 12 or 13 percent for the more PPOs.

While that's a little lower than this year, he said he doesn't expect rate increases to abate. "I don't see a 6 or a 4 [percent increase] in the future. I see probably a flat to slightly increasing line from where it is now," he said.

The Kaiser-HRET survey, released at a Washington news conference, also showed that employers are continuing to shift more costs to workers through deductibles and co-payments. That trend, too, slowed somewhat from the previous year.

A single worker covered by a PPO paid an average $287 out of pocket before insurance kicked in. That's up just $12 from last year, but $112 since 2000. Co-payments for brand-name prescriptions on insurers' list of preferred drugs are $21, up from $19 last year and $13 in 2000.

Analysts said, companies are being more cautious in shifting costs.

"Benefit changes are not going on the way they were before," said John Miller, executive director of the Maryland Health Care Coalition, a group primarily representing large employers. "They've already cut what they can cut."

Change in deductibles and co-payments now are "minimal," agreed Pete Borchardt, president of the Borchardt Group, a benefits consultant in Easton. "There's more tweaking around the edges."

Despite the lower rate of increase, workers continue to feel the pinch of higher health costs, said Christine Owens, director of public policy for the AFL-CIO.

"Workers generally don't feel like they're any better off this year," Owens said. "Health care has been on the table in every contract negotiation. For the most part, unions have kept the same coverage, but with an increase in cost, or with a lower increase in wages."

Employers, too, are feeling the pressure, said Kate Sullivan Hare, health policy director for the U.S. Chamber of Commerce. "There just aren't that many options left for small business. When you're a small business and you've got a $30,000-a-year employee, you just can't afford to spend $10,000 on health coverage."

Sun staff writers Bill Atkinson and Lorraine Mirabella contributed to this article.

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