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Job-based health insurance premiums rise, but only by single digits

WASHINGTON—Premiums for job-based health insurance increased 9.2 percent on average in 2005, ending four straight years of double-digit growth and offering new optimism that premium inflation may have peaked, according to a survey released Wednesday.

Premiums have grown 73 percent since 2000, far outpacing the annual rates of inflation and growth in workers' earnings. And small businesses continue to drop health coverage to avoid the spiraling costs of health insurance.

As a result, the number of uninsured Americans has swelled to 45.8 million, forcing workers to spend more disposable income for health care, according to the widely respected report by the Washington-based Kaiser Family Foundation and the Health Research and Educational Trust of Chicago.

"It is low-wage workers who are being hurt the most by the steady drip, drip, drip of coverage draining out of the employer-based health insurance system," said Drew Altman, president of the Kaiser Family Foundation.

Darrin Forse, the owner of Force Transportation, a trucking firm in Pasadena, Texas, said eight of his 14 employees opted for coverage two years ago. But six have dropped coverage since then as their share of the costs increased.

"It got to the point where it was just too high. Most of them just said `to heck with it,'" Forse said of his employees, who earn roughly $400 to $800 a week.

The 9.2 percent premium growth was more than three times larger than the 2.7 percent average increase in workers' earnings, the survey found. It was more than 2 { times larger than the 3.5 percent average annual growth in inflation.

The survey was based on telephone interviews with officials from 2,995 randomly selected public and private employers from January to May.

This year, the average annual cost for family coverage is $10,880, which exceeds the gross income—$10,712—for a full-time minimum-wage worker. Single coverage costs $4,024 a year. The employee's share of the cost remained nearly unchanged at 26 percent for family coverage and 16 percent for individual coverage.

Job-based health coverage remains the nation's leading form of insurance, covering 159 million people younger than 65 and their dependents. Ninety-eight percent of employers with 200 or more workers offer health coverage.

The percentage of small businesses—with three to 199 employees—that offer health coverage fell from 69 percent in 2000 to 60 percent in 2005, the survey found.

The slowdown in premium growth reflects a number of subtle influences, said Jon Gabel, a co-author of the report and the vice president of the Center for Studying Health System Change. One factor is health-care costs settling after the one-time price increases that followed the industry's easing of restrictive managed-care practices, Gabel said. In addition, insurers are keeping prices low to improve market share and prescription-drug price increases have slowed because of a lack of new blockbuster drugs, he said.

At Landmark Engineering and Surveying Corp. in Tampa, Fla., owner David Hurley still pays the entire cost of premiums for his 85 employees, but he's warned them that will change if the price keeps going up.

"So far, we've been able to either change companies or negotiate a price down" when the cost becomes too high, Hurley said. "But it has gotten to be more and more difficult and takes more and more effort. Sooner or later we're going to be in that blind alley and not be able to get out of it."

To help curb costs, employers are requiring waiting periods before covering new employees, cutting retirees' coverage and utilizing wellness programs and other patient-driven initiatives to improve their workers' health.

"But there's little confidence out there that we have an answer to health-care cost growth," Gabel said. "In the mid-1990s, premium hikes dropped to less than 1 percent, and we're still far away from that right now."

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For a copy of the study, go to the Kaiser Family Foundation's Web site, at www.kff.org/insurance/7315/sections/index.cfm.

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(c) 2005, Knight Ridder/Tribune Information Services.

GRAPHIC (from KRT Graphics, 202-383-6064): 20050914 HEALTHCARE

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