Taking The Long View Of Insurance Costs

October 29, 2008
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Employers and their workers received some moderately good news regarding the cost of health insurance premiums: The hike in 2007 was less than the previous year.

According to the annual survey conducted by the Kaiser Family Foundation and the Health Research and Educational Trust, both based in the nation’s capital, the yearly cost increase in premiums rose by 6.1 percent last year — a full point-and-a-half less than the 7.7 percent increase in 2006.

“We’re seeing some moderation in health-cost increases, but premiums for family coverage now top $12,000 annually,” said Kaiser President and CEO Drew Altman.

“Every year health insurance becomes less affordable for families and businesses. Over the past six years, the amount families pay out of pocket for their share of premiums has increased by $1,500,” added Altman.

The 6.1 percent average increase was the slowest yearly rate of premium growth since 1999 when the cost of insurance went up by 5.3 percent. Still, last year’s hike was more than double the overall inflation rate and more than two points higher than the rate workers’ pay rose. And that scenario has pretty much been the case for the past two decades.

Premium Increases Versus Inflation

Since 1988, the cost of health insurance premiums rose faster than inflation in 16 of the past 20 years. Here is a summary of those increases:

  • Premium increases doubled inflation in eight years (1991, 1993, 1994, 1999, 2000, 2005, 2006 and 2007).

  • Premium increases tripled inflation in five years (1988, 1989, 1990, 1992 and 2001).

  • The premium increase in 2004 was five times inflation.

  • The premium increase in 2003 was six times inflation.

  • The premium increase in 2002 was 10 times inflation.

  • Premium increases were less than inflation in four years (1995, 1996, 1997 and 1998).

From 1988 through 2007, the average annual rise in health insurance premiums was 8.9 percent. Over that same 20-year period, inflation increased by an annual average of 3.4 percent, or 5.5 percent less than the rise in premiums.

Premium Increases Versus Workers’ Earnings

The cost of premiums also rose faster than workers’ earnings in 17 of the last 20 years, and in no year did a gain in pay top a rise in premium costs. Here is a summary of those increases:

  • Premium increases doubled workers’ pay in five years (1994, 1998, 2000, 2001 and 2006).

  • Premium increases tripled workers’ pay in five years (1990, 1991, 1992, 1993 and 2005).

  • Premium increases quadrupled workers’ pay in four years (1988, 1989, 2002 and 2003).

  • The premium increase in 2004 was five times workers’ pay.

  • The premium increases in 1999 and 2007 were less than double workers’ pay.

  • The premium increase in 1997 matched the gain in workers’ pay.

Like inflation, the average annual increase in workers’ earnings over the 20-year period was 3.4 percent, while premiums rose by an average of 8.9 percent.

The 2007 survey of employers, which included more than 3,000 randomly selected non-federal public and private firms, revealed that workers paid 16 percent of the premiums for single coverage and 28 percent for family coverage. But the survey also showed that workers in small firms paid significantly more for family coverage than their counterparts in large companies: $4,236 annually versus $2,831.

“The number of options for low-wage earners is limited and the greatest burden of all health care costs falls to this segment of the population,” said Mary Pittman, president of the Health Research and Educational Trust.

How Voters Feel

Despite premium increases being higher than inflation and workers’ pay for nearly 20 straight years, registered voters placed health care fourth among the issues they wanted the presidential candidates to discuss, in a poll conducted by the Kaiser Family Foundation.

The economy, the Iraq war and gas prices finished ahead of health care for Republicans, independents, and total registered voters, a grouping that included Democrats. Those that identified themselves as Democrats placed health care third, behind the economy and Iraq war, but ahead of gas prices.

The survey, which was done last summer, found that 62 percent felt the president and Congress could do “a lot” about the cost of health care. But that cost finished third, behind paying for gas and getting a good-paying job, when they were asked to rank serious monetary problems. Forty-three percent reported paying for gas was the top problem for them; 27 percent named finding a good job; and 25 percent cited paying for health care and health insurance.

Half of the 1,200 survey respondents said they wanted Senators John McCain, R-Arizona, and Barrack Obama, D-Illinois, to tell them how they’re going to make health care and health insurance more affordable, while 22 percent said they wanted to hear how the candidates would make insurance coverage available for everyone.

Two-thirds of the respondents felt that reducing fraud and waste in the system would do a lot to reduce costs, the option chosen most often of the 10 options the survey offered. HQ

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