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Your health benefits in 2002 and beyond: Pay more, get less, and get used to it

Do you hear a small scream in your head when you open your paycheck envelope? You're not alone. Workers nationwide pay more than ever for their health insurance benefits, get less coverage, and their employers say it's a trend that has no clear end in sight.

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Average annual health insurance premiums rose to $7,954 for family coverage, up from $7,053 in 2001.

There's no good news for you or your employer when it comes to health insurance costs, according to the Kaiser Family Foundation's (KFF) annual health benefits survey of 3,262 public and private companies. According to the KFF, premiums for group health insurance jumped an average of 12.7 percent in 2002 — the second consecutive year of double-digit premium increases and the largest increase since 1990.

On average, you're now paying $38 per month for single-person health insurance, a 27 percent increase from 2001. If you have a family, you're paying $171 per month, a 16 percent increase from 2001.

If those figures make you wince, imagine how your employer feels: Average annual health insurance premiums rose to $3,060 for single coverage (up from $2,650 in 2001) and $7,954 for family coverage (up from $7,053 in 2001). If your employer is turning a profit, those costs are definitely eating into them. Do these figures make you wonder if financially struggling small employers will begin dropping health insurance coverage for their workers altogether?

Again, you're not alone. KFF says that with a weakened economy and escalating premiums, a brief period of increasing employer coverage (and a simultaneous drop in the number of uninsured Americans) has come to an end. In 2002, 61 percent of all small businesses (firms with 3 to 199 workers) offered health insurance to their employees, down from 67 percent in 2000. According to the study, "this may be evidence of erosion in the number of small firms offering coverage" in light of financial pressures.

No end to the misery

But the misery doesn't just end there. While you're paying more for your health insurance, you're also getting fewer benefits. According to KFF, for the first time in several years, the percentage of insured workers that say their benefits have decreased is greater than the percentage saying their benefits have increased. (Ten percent report benefit increases, while 17 percent report benefit reductions.)

Central to these benefit reductions is a hike in deductibles. Since 2001, the average deductible for PPO plans (preferred provider plans that cover about half of all workers) has increased a whopping 37 percent to $276. And the percentage of workers enrolled in HMOs who must pay a $20 co-payment for outpatient services rose from 2 percent in 2001 to 11 percent in 2002 .

The average deductible for PPO plans has increased a whopping 37 percent.

The harsh reality is that you will continue to pay more for your health benefits in the foreseeable future. This year, 43 percent of all firms and 78 percent of large firms (200 or more workers) report that they are "very or somewhat likely" to increase the amount that their workers pay in 2003. Additionally, 32 percent of all firms and 42 percent of large firms say they are "very or somewhat likely" to increase deductibles, while 34 percent of all firms say they are "very or somewhat likely" to raise employee costs for prescription drugs. "With health costs rising rapidly and no solution on the horizon, workers can expect to pay more and get less coverage," says KFF President Drew Altman. "It will be even harder to tackle health care's big ticket problems such as providing drug coverage for seniors and covering the uninsured."

All in the numbers

The survey, which randomly polls selected public and private firms, was conducted between January and May of 2002. It also shows that:

  • Premium increases were similar across the nation, ranging from 12.5 percent in the South and Northeast to 13.2 percent in the Midwest.
  • The use of three-tier cost-sharing arrangements for prescription drugs has nearly doubled during the past two years, growing from 29 percent of insured workers in 2000 to 57 percent in 2002. Under these arrangements, enrollees pay more out-of-pocket for certain classes of medications and patented (nongeneric) drugs.
  • Fifty-six percent of large firms increased the amount that workers paid for health insurance in 2002.
  • Even when a firm offers health insurance, not all workers get covered. In firms that offer coverage, 79 percent of workers are eligible for coverage.
  • Nine percent of large firms eliminated retiree benefits for new hires or existing employees in the last two years.

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