Double Digits Still Plague Health Care

September 24, 2004
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GRAND RAPIDS — Cost and benefit trends in West Michigan mirror those nationally for employer-sponsored health plans.

And that includes new survey data confirming 2004 to be yet another year of double-digit premium increases with employers shifting more of the rising costs to employees.

Employers surveyed by The Employers' Association in Grand Rapids and the Alliance for Health reported a collective 11.5 percent average increase in 2004 in employee health premiums.

The average is across all health plan products and after employers altered their health plans to mitigate rising costs.

This was the fifth straight year of double-digit premium increases and follows an average 10.4 percent increase for 2003 renewals.

During the five-year period from 2000 to 2004, the average cost of a health plan in West Michigan has risen at a compounded rate of nearly 75 percent.

While rising health premiums have stretched employers, businesses generally remain committed to providing employee health benefits.

Nonetheless, newly released survey results show firms are making major benefit alterations in their health plans and passing more costs onto employees to mitigate rising costs.

According to David Smith, Employers' Association president and CEO, even with those benefit changes, the rising cost of health benefits is "getting on the edge of unmanageability." Yet he said employers believe they need to continue offering health benefits in order to remain competitive in the labor market.

Smith sees a need for businesses that have had to adapt to ever-changing economic forces to begin pushing for change in how health care is delivered. Pushing for that change among care providers is one part of a broader drive to get escalating costs under control that will involve many components.

"We're doing just cost things. We're really not doing anything to change the system," Smith said. "Unless the system of delivery is changed, the best-designed cost-containment system in the world isn't going to change things. It's just going to shift the way money is spent."

The premium increases of the last five years have pushed the average monthly premium for a family health plan to $742 and to $626 for a two-person plan.

A one-person health plan in West Michigan now costs an average of $291 per month, according to The Employers' Association and Alliance for Health's recently released survey.

In 2000, the average monthly premium for a one-person plan was $188, nearly 55 percent less than today, and $399 for a two-person plan, 57 percent below today's average cost.

The average premium for a family plan was $455 in 2000, about 63 percent less than in 2004.

The premiums are averaged across all health plan providers and all product categories: indemnity, HMO, PPO, POS and self-funded health plans.

Actual premiums vary widely from significantly lower or higher than the average, in some cases representing a difference of more than two to three times.

The annual health-care cost survey, which generated responses from 135 employers, found an increase in how much of the financial share employees in western Michigan are now required to pay for health coverage.

The percentage rose from an average of 17 percent to 22 percent in 2003 for varying health plan products, to 22 percent to 25 percent in 2004, indicating that employers in the region are continuing to shift a larger share of the cost for health coverage onto employees.

Maggie McPhee, director of information services for The Employers' Association, said employers are increasingly shifting more of the costs for health benefits to employees in order to keep coverage in force.

"They're changing it to the point they can afford it," McPhee said.

The local findings of The Employers' Association and Alliance for Health's 2004 cost survey reflect national trends highlighted in a similar survey conducted annually by two health-care research groups.

One potential positive of cost-shifting is that employees who feel a greater share of the cost burden may gain a better understanding of the true cost of health care and become better consumers, McPhee said.

"It will force employees to get involved in the decision-making and therefore get educated," she said.

Nationally, employers experienced an average 11.2 percent increase in their health premiums for 2004 renewals after making alterations in their benefit designs. At least, that's the finding in an annual cost survey conducted by the Kaiser Family Foundation and the Health Research and Educational Trust.

A typical family health plan premium now costs an average of $829 a month nationally.

A one-person plan costs $308 per month on average, according to the Kaiser Foundation/Health Research and Educational Trust national survey.

The survey also shows that the cost of health coverage nationally has risen 59 percent since 2001, while workers wages during the timeframe have grown 12 percent and inflation has been low.

The Kaiser Foundation survey found cost shifting continued in 2004, albeit at a lesser rate than in past years, with employee contributions to their health plans growing 57 percent for single coverage since 2001 and 49 percent for a family plan.

The cost of family health coverage is now approaching the gross earnings of a full-time minimum-wage worker, said Drew Altman, president and CEO of the Kaiser Family Foundation. The continuation of the cost trends will make health coverage increasingly unaffordable for some workers and employers, worsening access issues, Altman added.

Some data show cost trends beginning to moderate, leading to smaller yet still considerable annual premium increases. Altman sees employers doing more to minimize continued cost increases.

"But I see no scenario for the future that does not have health-care costs continuing to outpace the increase in wages and the growth inflation and, I would say, by a very wide margin," he said.    

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