Up, up and away: Health care Premiums rising

by Lesley Politi on December 4, 2008

Up, up and away: Health care premiums rising

| Friday, Nov 28 2008 8:00 AM

Last Updated: Monday, Nov 24 2008 4:39 PM

It’s that time of year again. Time to find out how much your health insurance premiums will rise.

Not if they’re rising, but rather how much more you and your employer will pay next year, because at this point, some increase is almost a given.

“If we were back in the Roman days I would have been killed years ago because they always sacrificed the messenger,” joked Jim Elrod, president of the International Brotherhood of Electrical Workers, Local 428, and a trustee who helps oversee the union’s health plans.

Since 1999, the union’s monthly health care premiums have risen an average of 12.58 percent a year, but average wages have gone up only 2.94 percent a year. That reflects a national trend.

A study by Families USA, a nonprofit health care advocacy group, recently examined health care costs and wages on a state-by-state basis. The group found that in California, from 2000 to 2007, annual health insurance premiums provided through the workplace rose 95.8 percent from $6,227 to $12,194. During the same period, the median earnings of California’s workers increased just 19.3 percent, from $25,740 to $30,702.

For family health coverage in California, the employer’s portion of annual premiums rose 90.9 percent from $4,683 to $8,938. The worker’s portion of annual premiums rose 110.8 percent from $1,544 to $3,256.

Co-payments and deductibles are up, too, especially for workers in small businesses with three to 199 workers, according to the 2008 Employer Health Benefits Survey, released by the Kaiser Family Foundation and the Health Research & Educational Trust.

At companies of that size, more than one in three (35 percent) of covered workers nationally must pay at least $1,000 out of pocket before their plan pays a share of health-care bills. That’s up 21 percent from last year.

The outlook is bleak, then, for employees and employers alike.

“It’s affecting not only profitability but viability in many cases,” said Keith Brice, chairman of the Greater Bakersfield Chamber of Commerce and president of Mid State Development, a Bakersfield non-profit organization that assists small businesses.

In the current credit crunch, lenders are looking hard at profitability before making loans, and health care costs are taking a big bite out of profits, Brice said.

For years, employers have passed health care costs onto employees, but there’s only so much of that employees can bear when wages aren’t keeping pace with increases.

There’s no obvious solution coming from the federal government, and a health care reform package backed by the governor died in the last California legislative session.

So the private sector continues to shop around for the best premiums, reduce coverage, or look at alternative models such as paying a lump sum in lieu of benefits, or Health Savings Accounts. HSAs, as they are known, are tax-free investment accounts that can be used to cover medical costs up to a set amount, often the first $1,000 or $2,000, after which an insurance policy kicks in. Earnings on investments are tax-free. So are withdrawals for qualified medical expenses.

HSAs have increased seven-fold since 2004, with 3.2 million individuals covered this year. Bakersfield health insurance broker Clayton Koerner likes them, even with the stock market in turmoil.

“This would be a great time to do it with so many bargains in the market, and I’d rather have my money in my own pocket than with an insurance company,” said Koerner, a benefits consultant with Alliance Brokers and Consultants Inc.

Ron Pollock, executive director of Families USA, isn’t a fan of HSAs, though.

“Essentially what they are is high-deductible insurance policies,” he said. “The only people who will really come out ahead with them are people who are healthy and who have higher incomes that put them in the upper tax brackets.”

Companies can always drop benefits, of course, but so far they appear to be showing restraint, perhaps worried they won’t be able to attract top talent. The number of employers dropping benefits entirely hasn’t changed much the last two or three years, according to Kaiser.

For those who continue to cover workers, it’s going to be ugly, the chamber’s Brice said.

“At the end of the day, employers are going to have to pay it or benefits are going to be reduced,” he said. “There aren’t a lot of options.”

Source: www.bakersfield.com

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