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Survey of Employers Finds Premiums Rising, Coverage Shrinking September 6, 2002 The latest
national survey of health insurance trends is drearily familiar. Employers
faced another year of double-digit rate increases -- 12.7 percent this
year, the largest since 1990. And there's also less coverage for retirees
and for small-business workers. "It's hard
to find a lot of good news in this study, except to say: I suppose it
could have been worse," said Drew E. Altman, chief executive of the
Kaiser Family Foundation, which sponsored the study with the Health
Research and Educational Trust. The survey of 3,262 public and private
employers, released yesterday, found that premiums are likely to continue
to rise. "We should
expect to see sharply rising health care costs for the foreseeable
future," Altman said. "Workers can expect to pay more and get
less coverage." The increases
are attributed largely to more spending on prescription drugs and hospital
care by an aging population. For the first time in four years, more
workers experienced reduced benefits than increased benefits, the report
said. Altman said he
was struck by the drop in coverage for retirees. Over the past two years,
9 percent of large employers -- those with 200 or more workers -- have
eliminated retiree benefits for new hires or existing employees, the
survey said. What's more, 11
percent of large employers say they will likely eliminate retiree benefits
for new or existing workers over the next two years. "There
will be less and less retiree coverage," Altman said. "If I were
a baby boomer, I would be quite worried about that." In addition,
the number of small employers (three to 199 workers) offering health
coverage dropped from 67 percent in 2000 to 61 percent this year. Small
employers are particularly vulnerable to premium increases because they
have less bargaining power with insurers, Altman said. With the
downturn in the economy, Altman called the premium increases a
"double whammy" for employers large and small. Employers have
responded by cutting benefits or raising the cost to employees. Premiums
reached new plateaus this year: about $3,000, on average, for single
coverage and $8,000 for family coverage, the survey said. While employers
still pick up most of the cost, the employees' share has risen
substantially. Employees now pay an average of $454 per year for single
coverage (a 27 percent increase over last year) and $2,084 per year for
family coverage (a 16 percent increase). Employees also
are paying higher deductibles and co-payments for prescription drugs this
year, the survey reported. And there's
more pain on the way, Altman said. Among large employers, nearly eight of
10 reported they will likely increase the amount employees will pay for
premiums next year. In the
Washington area, some employers said their health insurance costs rose
faster than the national average this year. Montgomery
County raised its medical, dental and other health-related premiums by 26
percent for more than 13,000 employees, retirees and dependents, including
police, fire and corrections department workers, according to county
benefits manager Eric Wallmark. Wallmark said
the county was forced to raise rates after reducing them in 2000 and 2001.
Over the past three years, premiums have risen by an average of 7.7
percent annually, he said. In Northern
Virginia, premiums for Lammers & Associates, a hospital consulting
firm with four employees, rose 34 percent between 2001 and 2002. "Actually,
I don't know the reason, to tell you the truth," said Lawrence
Lammers, the firm's owner. "It's an assumption on my part that it's
the cost of medications going up." Lammers said
one of his employees must fill three prescriptions for cardiac-related
medications every 10 days. "He used
to pay $45 a month to fill his prescriptions," Lammers said.
"Now the co-pays have gone up and he's shelling out $135 a
month." Lammers said he
absorbs "all but a small piece" of his employees' premiums. The survey's
findings on declining retiree benefits will be validated by another study
this fall -- this one by employer benefits consultant Watson Wyatt
Worldwide, said Sylvester Schieber, the firm's research director. "Some
employers are just eliminating plans [for retirees] and they also have
implemented caps that are gradually eroding the value of the benefits that
their coverage will pay," Schieber said. Today, a
typical retiree pays about 60 percent of the cost of an employer-sponsored
plan, which covers expenses not picked up by Medicare, the government
health program, Schieber said. Watson Wyatt
estimates that if employers do not raise their caps, the typical retiree
will pay about 80 percent of the cost in 2011 and more than 90 percent in
2030, Schieber said. Schieber's
advice to baby boomers? "They
probably ought to be saving more than they are currently," he said.
"Number two, given the way we earn our benefits in this society --
primarily through our employers -- maybe they ought to be thinking about
their whole retirement plans and working until they are Medicare
eligible." He added:
"Everything we're looking at is telling us that we need to revisit
our early-retirement plans." Copyright
© 2002 Global Action on Aging
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