Burden of benefits only gets worse

You do not have to be especially good at math to reach the conclusion that the crisis of rising health insurance costs is getting worse – and that it may in fact be the biggest reason so many small-business owners are still struggling to prosper in this economy.



Health insurance premiums also deserve a big dose of the blame as to why so many consumers aren’t especially confident with their own economic health.



The following numbers tell the story, though the gist of it is that more and more businesses are cutting back on benefits, because the cost of those benefits continues to rise at an annual double-digit pace.



According to a report from the Kaiser Family Foundation, employer-sponsored health insurance premiums increased by an average of 11.2 percent in 2004 – less than last year’s increase, which was about 14 percent, but still the fourth straight year of double-digit growth.



The Kaiser Foundation’s annual “Employer Health Benefits Survey” also showed that the percentage of all workers receiving health coverage from their employer in 2004 is 61 percent, about the same as in 2003 (62 percent) but down from the recent peak of 65 percent in 2001. As a result, there are at least 5 million fewer jobs providing health insurance in 2004 than 2001.



The study suggests that a likely contributor is a decline in the percentage of small employers (three to 199 workers) offering health insurance over this period. In 2004, 63 percent of all small firms offer health benefits to their workers, which is down from 68 percent in 2001.



“The cost of family health insurance is rapidly approaching the gross earnings of a full-time minimum wage worker,” said Drew Altman, president and CEO of the Kaiser Family Foundation. “If these trends continue, workers and employers will find it increasingly difficult to pay for family health coverage and every year the share of Americans who have employer-sponsored health coverage will fall.”



Other highlights from the Kaiser study include:



Worker contributions. This year, workers on average contribute $558 of the $3,695 annual premium cost of single coverage and $2,661 of the $9,950 cost of premiums for family coverage.



Cost sharing. Cost sharing rose modestly in 2004 compared to the larger increases of recent years. Most covered workers are in health plans that require a deductible to be met before most plan benefits are provided.



Consumer-driven plans. While about 10 percent of all firms offer a high-deductible plan to covered workers this year, only about 3.5 percent of those firms offer a personal or savings account option along with a high-deductible plan. These accounts permit employers (and sometimes employees) to make pre-tax contributions, which can be used by employees to pay for routine medical care. The survey finds that employers, particularly larger firms, are interested in high deductible plans (at least $1,000 for single coverage). About 6 percent of all firms say they are “very likely” to offer such a plan within two years, and another 21 percent of all firms say they are “somewhat likely” to do so.



“You have to look over the past several years to really understand why Americans are so worried about health care costs,” said Altman. “Just for premium contributions alone, families are paying $1,000 more this year for their health coverage than they paid in 2000. More than any other factor, these out-of-pocket cost increases are what’s driving voter concern about health.”



The problem in all of this, of course, is the simple math in all of this. The costs of benefits are rising much faster and much higher than that of the wages that people earn. So the cost that is being moved over to them is one that the typical person simply can’t afford.



“Since 2001, the cost of health insurance has risen 59 percent,” said Jon Gabel, vice president for health systems studies at Kaiser’s Health Research and Educational Trust. “Over that period, employee contributions increased 57 percent for single coverage and 49 percent for family coverage, while workers’ wages have increased only 12 percent. This is why fewer small employers are offering coverage, and why fewer workers are taking up coverage.”



And there’s the rub. Fewer people are walking around with health insurance. That’s not just bad for the economy – it’s dangerous.

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