Health Insurance Now Costs More Than Minimum Wages

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Fri, 16 Sep 2005 05:07:43 -0400

Health Insurance Now Costs More Than Minimum Wages

 

 

 

 

http://news./s/latimests/20050915/ts_latimes/risingpremiumsthreatenjobb\

asedhealthcoverage

 

Rising Premiums Threaten Job-Based Health Coverage

Los Angeles Times - Thu Sep 15, 7:55 AM ET

 

The average cost of health insurance for a family of four has soared

past $10,800 — exceeding the annual income of a minimum-wage earner,

according to a survey released Wednesday.

 

For some, this year's survey by the Kaiser Family Foundation and the

Health Research Educational Trust was the latest sign that a

relentless rise in premiums threatens to collapse the central pillar

of America's health insurance system: job-based health coverage. Since

2000, premiums have gone up 73%, while wages have grown 15%, Kaiser

researchers concluded.

 

Rising costs are forcing many businesses, especially smaller

companies, to stop offering coverage and are causing some employees

who can no longer afford insurance at work to buy it on their own — or

go without.

 

" What we are seeing is an unraveling of the way we finance healthcare

in the United States, " said William Custer, director for the Center

for Health Services Research at Georgia State University in Atlanta.

" It is coming apart at the edges, and those edges are small business

and low-wage workers. The levees are breaking. "

 

Drew E. Altman, president of the Kaiser Family Foundation, said the

cumulative effect of rising costs was that " we are seeing a slow

deterioration of our employment-based health insurance system, which

is the backbone of healthcare in this country. "

 

As the Kaiser report was being released Wednesday, Starbucks Corp.

Chairman Howard Schultz said his company would spend more on health

insurance for its employees this year than on raw materials needed to

brew its coffee — a sign, he said, that American businesses face a

healthcare crisis.

 

" It's completely nonsustainable, " he said, even for companies such as

his that " want to do the right thing. "

 

The Kaiser Foundation survey, published each fall before workers

choose policies in open-enrollment periods, is considered the

definitive measure of what coverage will cost workers and employers.

 

This year researchers, who collected data from 2,995 randomly selected

U.S. employers, estimated that premiums for family coverage grew 9.2%

from last year to $10,880, including company contributions — more than

the $10,712 a worker earns before taxes at the federal minimum wage.

 

The average worker's share of premiums for family health coverage was

$2,713 in 2005, or about a quarter of the total cost. The average

employee contribution has increased by more than $1,000 in three years.

 

The premium increase is less than the Kaiser survey has found in

recent years — the jump was 11.2% in 2004 and 13.9% in 2003 — but it

continues a trend that is hard on employers and families alike.

 

Employers, equally hard-pressed by the rising costs, increasingly are

dropping health coverage as an employee benefit or offering

high-deductible plans that shift more cost — and more risk — to

employees. Just 60% of businesses offered health insurance this year,

down from 69% in 2000, the study found.

 

The employer-sponsored system of healthcare in the U.S. is relatively

recent, tracing its roots to wage and price controls implemented by

the government during World War II. To attract workers, some companies

began offering health benefits as a perk, said John R. Graham,

director of healthcare studies at the Pacific Research Institute in

San Francisco.

 

But " employers don't have a competitive advantage to providing you

health insurance any more than they have in buying you a house or a

pair of running shoes, " Graham said.

 

Small companies are most likely to drop coverage because of cost

concerns, according to Menlo Park, Calif.-based Kaiser Family

Foundation, which is not affiliated with healthcare provider Kaiser

Permanente.

 

" When we consider that it is small business that drives the economy —

to have that engine resting on the backs of millions of uninsured

workers is a bad proposition for the U.S. economy, " said Peter Lee,

president of the San Francisco-based Pacific Business Group on Health,

an alliance of employers that buys insurance for big companies. " This

has to be seen as a wake-up call to policymakers and healthcare

providers as it puts an increasing burden on an already frayed safety

net. "

 

Insurers blame doctors, hospitals and consumer demand for new medical

technology for escalating rates.

 

" Prices are going up, especially for hospitalization, " said Chris

Ohman, president of the California Assn. of Insurers, a trade group.

 

But consumer advocates question why premium increases are needed as

insurance industry profits rise.

 

" What the HMOs can't explain is why premiums are increasing twice as

fast as hospital and physician costs, " said Jerry Flanagan of the

Foundation for Taxpayer and Consumer Rights, a Santa Monica nonprofit.

 

Although Congress has passed some limited healthcare measures, such as

a new Medicare prescription-drug benefit, efforts to revamp the system

have failed. Meanwhile, the number of Americans without health

insurance continues to grow, with the Census Bureau reporting last

year that the number of Americans without coverage grew to a record 45

million.

 

Among workers who are taking action on their own is Christie Apostolo,

29. She and her husband decided this spring that they had to stop

spending $800 a month through her employer to cover the couple and

their two young children if they ever were going to save enough for a

house with their combined annual income of $82,000.

 

Through an online insurance brokerage firm, she found a $498-a-month

plan with Woodland Hills-based Health Net Inc. Her new plan has a $30

co-pay to see a doctor four times a year, vision and dental coverage,

and a $500 deductible — far less than the $2,500 deductible in her old

plan.

 

" It's a couple hundred dollars a month we saved, but that's groceries

for the week, " said Apostolo, who lives in Pacific Grove, Calif.

 

As more Americans like Apostolo become responsible for their own

healthcare choices and costs — much as workers have become responsible

for their retirement with the shift from company pensions to 401(k)

plans — businesses that cater to them are profiting.

 

Among them is Encino-based Answer Financial Inc., an online broker

that sells all kinds of insurance. Healthcare is one of the company's

fastest-growing lines of business.

 

Answer Financial's clients include the self-employed, the unemployed,

part-timers and even full-time workers who aren't eligible for their

employer-sponsored plans. Their customers increasingly include people

who are employed but either can't afford the premiums of their

employer-offered policies or are healthy enough to think they can get

a better deal somewhere else.

 

In the last year, the company has doubled the number of agents who

sell health insurance to 40 and plans to quadruple that number next

year, Chief Executive Alan Snyder said.

 

Extending the comparison to trends in retirement plans, Snyder

envisions a time when most employers will give defined contributions

instead of defined benefits — putting responsibility for finding

insurance on the workers. He believes that healthcare plans will

eventually be similar to self-directed 401(k) plans that workers

control and take with them when they leave.

 

The trend " is very exciting for us, " Snyder said. " Employers are going

to be saying, 'Here's so much money, you go pick the plan that is best

for you.' "

 

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