Health Care

Rise in Insurance Rates Slows, Kaiser Survey Says

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Filing cabinet of insurance bills. i

Although the increase in health insurance rates dropped in the past year, rates have gone up faster than inflation every year for the past decade. Russell Underwood/Corbis hide caption

toggle caption Russell Underwood/Corbis
Filing cabinet of insurance bills.

Although the increase in health insurance rates dropped in the past year, rates have gone up faster than inflation every year for the past decade.

Russell Underwood/Corbis

A new survey shows that an increase in health insurance rates this year is less than the increase last year. But, that's not necessarily good news to the employers or employees who pay the premiums.

Every year, the Kaiser Family Foundation asks 2,000 small, medium and large businesses what they're doing about health insurance and how much they're paying.

This year, businesses reported facing a 6 percent increase in health insurance premiums. That's lower than last year's 8 percent increase and much lower than the 14 percent increase in 2003.

But that hides another key number: Health insurance rates have gone up faster than inflation every year for the past decade. And the cumulative effect hurts, says Kaiser's Drew Altman.

"Nobody is celebrating, and a moderating rate of increase doesn't feel like moderation to employers or working people," Altman says. "All they know is that it's going up this year again and it's going up more than anything else around."

It's going up much more than wages and much more than the costs of goods and services.

Still, the percentage of small- and medium-sized firms offering some type of health insurance held steady from last year to this year at about 60 percent, and virtually all large firms continue to offer insurance to their employees.

The survey shows no big increase in the number of workers enrolling in the new high-deductible health plans, but it does show that in the past couple of years, some companies are moving to higher premiums for higher-wage employees. Altman says it's a scramble.

"Employers are trying to do everything they can but they have no single, magic solution, so they're trying lots of things," Altman says.

At Schoonover Plumbing and Heating in the little town of Canton, Pa., Lavonna Clark is the office manager.

"Health insurance is our major benefit — our major draw for good employees," Clark says.

The company was one of those included in the survey. Clark has been at Schoonover for 29 years, but for the last five years, she has been struggling to keep health insurance costs manageable.

Clark says that every year, the rates increased to the point that she couldn't afford a major insurance company, she would search the Internet for one that was comparable; one that she felt Schoonover could afford and wouldn't cost the employees many of their benefits.

She has been going for policies that have higher deductibles for hospital costs and testing.

"Four years ago it was $250, then we went to $500, now we're at $1,000," Clark says. "Next jump, $1,500."

Even experts in health insurance are getting hit and have to be creative.

"This year we got hit by a 33 percent increase by one of our two major insurers," says Altman of the Kaiser Family Foundation. "We had no recourse so we switched plans and got a better rate."

But Clark says that in her experience, switching only works for a year or so, then the new insurer eventually increases the rate. She expects she'll be busy again next year trying to maintain the status quo.

"I'll just have to shop around again and we'll have to change, and there's a lot of paperwork to go through," she says. "But it's such a little company, we can't survive if we don't keep the costs down, so I'll be back looking on the Internet."

In the survey, employers said they are very, or somewhat likely to increase what employees pay for their health insurance and prescription drugs. But they have said that even in years that they haven't made major changes.

Altman suspects that what will really happen is that businesses will play a more active role this year in making sure health care reform is an issue in state and national elections.



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