The growth in healthcare costs decreased for the second year in a row in 2005, and increased by a single digit percentage for the first time since the year 2000, according to the 2005 Annual Employer Health Benefits Survey.
Released Sept. 14 by the Kaiser Family Foundation and the Health Research and Educational Trust, the survey also revealed that increasing healthcare costs have led to a smaller percentage of businesses offering health coverage to their employees. According to the survey, 60 percent of firms offered healthcare coverage to their employees in 2005, down from 69 percent in the year 2000. That decrease, according to the survey, represents 266,000 fewer firms offering coverage. The vast majority of the decrease was experienced by smaller firms, with nearly all larger firms of 200 employees or more offering healthcare coverage.
“It is the low-wage workers who are being hurt most by the steady drip, drip, drip of coverage draining out of the employer based health insurance system,” said Drew Altman, president of the Kaiser Family Foundation.
Although Mr. Altman welcomed the slowed growth of healthcare costs, at 9.2 percent in 2005 down from 11.2 percent in 2004 and 13.9 percent the year before, as good news. “The bad news,” he added, “is that that is the only good news.” Overall, health care costs continue to grow more than two and a half times the rate of inflation, which is 3.5 percent and more than three times the growth in workers’ wages, which is 2.7 percent.
Additionally, the survey found that annual premiums for family coverage in 2005, at $10,880, have surpassed the gross earnings of a full-time worker making the minimum wage, which would be $10,712. The percentage of premium paid by workers, 26 percent for 2005, has remained relatively stable, but the amount of actual money paid by workers has increased by $1, 094 for family coverage since the year 2000.
Among the respondents to the survey, which included over 2,000 randomly selected public and private companies, the main reason given for not offering coverage was the costs of high premiums, cited by 73 percent of employers.
According to another survey also released on Sept. 14 by the Robert Wood Johnson Foundation, the rising costs of healthcare coverage are also starting to affect the thinking of larger companies. “Business leaders know firsthand how important it is to offer health insurance, both because it improves the health of the workforce and because it makes their business more attractive to employees,” said the foundation’s president and chief executive officer, Risa Lavizzo-Mourey. “Small and mid-sized companies have long struggled to provide affordable health insurance for their employees, but now large companies with thousands of employees are finding it difficult to offer affordable health coverage.”
According to the Robert Wood Johnson Foundation’s survey, which was conducted by Alexandria, Virginia-based Public Opinion Strategies, 35 percent of those surveyed who expect an increase in healthcare costs said that it is likely that their employees would consider dropping their coverage due to increases in out-of-pocket costs. Additionally, the survey found that over half of those companies surveyed, 53 percent, have cited making health care more affordable, as their top priority for health care reform.
The Robert Wood Johnson Foundation survey found that business leaders support a broad range of proposals aimed at stemming the rising costs of health coverage, including tax incentives for business to offer health coverage and expansion of government programs.
Responding to the Kaiser survey results, Kate Sullivan Hare, the executive director of health care policy for the U.S. Chamber of Commerce, says that “Congress needs to jump-start a national infrastructure for health information technology so providers have real-time access to appropriate treatment,” Ms. Sullivan Hare said. “Federal health programs must lead the way in rewarding good medical performance and proper procedures.”
Gerry Shea, assistant to the president of government affairs for the AFL-CIO, built on this argument, arguing that reform efforts shouldn’t be focused directly on reducing costs, but rather eliminating the waste and preventable mistakes in the health care system.
He noted that the Kaiser Family Foundation’s annual survey has shown for years that employers are struggling with the ever increasing costs of health care, costs which he noted have had real economic effects on the country as employers who cannot bear those costs ship jobs overseas. “This survey documents how that is a losing battle,” he said. “American workers have paid the price for this increase, and the price has been dramatic.”
Employers are dealing with the problem as best they can, Mr. Shea said, calling for “creative thinking” to find way to relieve this pressure on companies. Although the end result should be cost relief, Mr. Shea argued that finding that relief should involve an examination of the health care system itself. “There’s no solution unless we can redesign the health care delivery system,” he said. It is unlikely, he added, that any solution could actually reduce the costs of care, but he argued that resolving issues in the delivery of healthcare could help slow the growth significantly. “If we can lower the trajectory,” of expected healthcare costs, he said, “that’s the difference between losing jobs and keeping them.”