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September 16, 2007

Health Insurance Premiums Vault Past Inflation

Health insurance premiums rose 6.1 percent this year — the lowest rate of increase since 1999 — but that fact offered little solace to employers and workers, who have seen overall premium increases rise far faster than wages or inflation during that same period.

The average cost of a family plan purchased by employers this year hit a new high, $12,106, according to a detailed annual survey of nearly 2,000 employers by the non-partisan Kaiser Family Foundation, a research group based in Menlo Park, Calif. Individual coverage premiums averaged $4,479.

“Health insurance is becoming increasingly unaffordable for many employers and working people in the country,” says Drew Altman, president of the foundation. “We’re seeing this more and more every year.”

While the percentage of the premiums paid by workers stayed about the same as last year, the dollar amount paid by workers toward their share of family coverage rose $308 to $3,281. Single employees paid an average of $694 toward their coverage, up $67.

The 6.1 percent increase in premiums was more than twice the annual rate of inflation in July of 2.4 percent.

Sharing The Pain

Premiums are just one part of the cost. Many workers also have annual deductibles they must meet before coverage kicks in. Those ranged from an average of $401 for individual workers in HMO-type plans to $1,729 in high-deductible plans.

Increasing those deductibles helped some employers keep costs down.

At Econ-O-Line Abrasive Products, a 23-employee shop that manufactures sandblasting equipment, owner Dan DePottey says his premium increases have averaged less than 5 percent in both of the past two years. During that time, the firm went from a zero-deductible HMO plan to one with a $1,000 deductible. To soften the blow, DePottey told employees they would be on the hook for only $250 of that deductible: The company would pick up the rest. So far, not very many of his workers have needed to take him up on the offer.

“I actually got lower costs this year than last,” says DePottey. His total health insurance premium bill fell from $147,000 last year to $141,000.

The number enrolled in high-deductible policies, which are often coupled with special tax-free savings accounts, did not increase in a statistically significant way, the survey found. Such plans cover about 5 percent of insured workers, or about 3.8 million people, up from 4 percent in 2006. Premiums are generally lower for such plans.

At The Community Builders, a non-profit company based in Boston that builds affordable housing, few workers signed up for a newly offered high-deductible plan, says Judy Lauch, who oversees benefits for the 500-worker firm.

The plan, with a $1,000 deductible for individuals and $2,000 for families, was offered to counter a steadily rising cost of the more traditional coverage.

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Posted by healthinsurance at September 16, 2007 01:32 AM