U.S. employer healthcare premiums outpace inflation, wages

Tue Sep 11, 2012 10:00am EDT

* Employer, employee premium costs doubled in 10 years

* Rising costs a potential challenge for Obama and Romney

By David Morgan

WASHINGTON, Sept 11 (Reuters) - U.S. health insurance premiums have climbed faster than wages and inflation this year, and look poised to accelerate in 2013, adding to voter concerns about soaring healthcare costs ahead of national elections in November.

A study released on Tuesday showed that premiums for employer-sponsored health plans, which cover about 149 million Americans, grew a modest 4 percent to $15,745 in 2012. It was a substantially slower rate of growth than in past years, including 2011, when premiums jumped 9 percent.

But the study's authors, at the nonpartisan Kaiser Family Foundation and the Health Research and Educational Trust, said higher costs still took a bigger bite from the income of middle-class employees, whose wages advanced only 1.7 percent, as employers shifted more healthcare costs to their workers.

Rising costs could present a challenge for both President Barack Obama and Republican Mitt Romney in their battle for the White House. They also pose a dilemma for employers, which shoulder most of the cost and face the choice of absorbing ever-higher charges or making their workers pay more.

Polling data shows that soaring healthcare costs rank alongside the government's Medicare program for the elderly as a top campaign issue for voters.

While Obama's administration is implementing healthcare reforms that could help rein in prices over time, neither the president nor Romney has unveiled a comprehensive plan for controlling costs.

This year's 4 percent increase eclipsed a general inflation rate of 2.3 percent. Some employers told researchers that insurers plan to push premiums up another 7 percent in 2013, the study said.

Premiums for employer health plans have doubled over the past decade, with worker contributions surging, on average, to $4,316 from $2,137 in 2002, according to data from a January-to-May survey of 2,100 public and private-sector employers.

LOW-WAGE WORKERS PAY MORE

The growth in premium costs is roughly in line with broader health spending, which has moderated in recent years as a weak economy has prompted many people to forgo costly medical services including doctor visits.

"In tough times, when wages are flat, people avoid using the healthcare system if they can. We also know that higher out-of-pocket costs deter utilization," said Kaiser President Drew Altman.

But this year, the impact of the slow economy on insurance premiums also appears to have been magnified by employers' switching to lower-cost, high-deductible health plans that increase out-of-pocket expenses for workers. Employer contributions hit an average $11,429 this year, up from $5,866 in 2002.

The study also shed light on cost and benefit anomalies in the employer-sponsored insurance market, a pillar of the $2.8 trillion U.S. healthcare system since the 1950s that has begun to weaken after decades of uncontrolled cost increases.

About 61 percent of companies offer health benefits to their workers. But researchers found that workers at lower-wage firms pay $1,000 a year more for family coverage than workers at higher-wage firms, even though employers with large numbers of lower-wage workers pay less for the coverage they provide.

Lower-wage firms are also more likely to offer plans with deductibles amounting to $1,000 a year or more.

Significant changes in premiums and cost-sharing arrangements have led to a sharp drop in the number of plans that are exempt from regulations in Obama's Affordable Care Act, including a provision that insurers pay for preventive care without imposing deductibles or co-pays on beneficiaries.

The study found that 58 percent of firms now offer exempt plans, down from 72 percent last year.

Data also showed a 26 percent jump in the number of young adults receiving healthcare benefits on parental plans under reform provisions, which extends childhood coverage to age 26.

There are now 2.9 million young adults on their parents' plans, up from 2.3 million in 2011, the study said.

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