Increase in health insurance rates slows

~ But rise in premiums still outpaces inflation.

As assistant director of human resources at Southeast Missouri State University, Alissa Vandeven has seen substantial increases in health insurance premiums over the last few years.

Next year will be no exception as the 1,200 employees at the university are facing a 10 percent increase in 2007.

Workers elsewhere can expect a lower increase but they probably won't find much comfort -- the average of 7.7 percent increase this year is the smallest since 1999, but still more than twice the rate of inflation.

"There's a reason for that," Vandeven said. "There seems to be more claims. But since I work with it and know what's happening in the industry, it doesn't really shock me. ... Naturally, we all wish there weren't increases."

Dr. Drew Altman is president and chief executive officer of the Kaiser Family Foundation, a health-care research organization that annually tracks the cost of health insurance.

"To working people and business owners, a reduction in an already very high rate of increase just means you're still paying more," he said.

Altman said the rising gap between premium growth and wages is particularly startling when one takes a longer look back. Since 2000, health insurance premiums have gone up 78 percent; wages 20 percent.

"Yes, the rate of increase is down, but I don't think anybody is celebrating," Altman said of this year's numbers.

The Kaiser Family Foundation's findings are based on a telephone survey of 3,159 randomly selected private and public employers. More that 155 million Americans get their health insurance through their jobs.

Employers on average pick up 84 percent of the cost for individuals and 73 percent for families.

The rising cost of health insurance is one reason that employers are finding it an increasingly difficult benefit to give their workers. Since 2000, the percentage of firms offering health benefits has fallen to 61 percent from 69 percent. This year, however, the deterioration appeared to stop, particularly among small businesses.

Yet, Altman said the slight improvement noted by the Kaiser study was statistically insignificant.

"It's worth observing that this survey comes out on the heels of the census report showing that we added 1.3 million people to the ranks of the uninsured in 2005," he said. "The long-term trend is very clear, and it's the slow unraveling of coverage in the employment-based system, especially among smaller employers."

Overall, the total cost of health insurance for individuals now averages $4,242 a year. For families, the costs average a whopping $11,480.

In this year's survey, Kaiser also looked at how many firms offer high-deductible insurance plans and health savings accounts. Such plans are being pushed aggressively by the Bush administration. They have lower monthly premiums, but that's because they require consumers to pay more of the initial cost of their health care.

Kaiser estimates about 2.7 million workers are enrolled in high-deductible plans with a savings account. Employers or employees get a tax break when they put money in the accounts.

Altman said what struck him about that number is that the intensity of the debate in Washington over health savings accounts is completely out of sync with the reality of the marketplace.

"Just a modest number of employers tell us they plan to move to these arrangements next year. It's a trickle, not a tidal wave," he said.

"Secondly, employers don't have a great deal of confidence that any of the weapons at their disposal to control health care costs will produce big results."

Business editor Scott Moyers contributed to this report.