Health Insurance Costs Soar, Study Says: Will Trend Last?

By: CBS News/ Associated Press
By: CBS News/ Associated Press

(CBS/AP) Think the new health-care law means the cost of medical insurance is trending downward? Think again. Annual premiums for family coverage rose 9 percent this year and surpassed $15,000 for the first time ever, according to a study released Tuesday by the Kaiser Family Foundation and the Health Research and Educational Trust. Premiums for single coverage climbed 8 percent over 2010.

That compares to increases last year of 3 percent and 5 percent for family and single coverage, respectively. Premiums for both family and single coverage have more than doubled since 2001, according to the study. Worker wages rose 34 percent over the same time period.

What's behind the big percentage jump? Kaiser CEO Drew Altman said that health care costs continue to rise, and insurer profits and the health care overhaul also have some impact.

The overhaul, passed by Congress last year, aims eventually to cover millions of uninsured people. Kaiser said initial provisions of the law contributed 1 to 2 percentage points to this year's premium hikes, which is about what many insurance analysts and benefits experts expected.

Companies and workers split premiums for employer-sponsored coverage, the most common form of health insurance in the U.S., and employers generally pick up at least 70 percent of the tab.

Businesses likely reacted to these cost increases by giving a smaller raise or no wage increase to their workers, said Helen Darling, CEO of the National Business Group on Health, a nonprofit organization that represents large employers on health care issues. Darling, who wasn't involved in the Kaiser study, said workers "basically are giving their pay raise to the health system. It's really bad news."

Many workers are about to receive notices from their employers regarding health insurance coverage for next year. Altman said he cannot say whether this year's increase represents a bad omen for 2012 or if it is just a one-year blip.

For months, insurers have been saying that health care use is growing more slowly this year, something industry observers pin on a sluggish economy. Altman and other benefits experts say that could lead to lower premium increases next year, since insurers base their rates in part on how often people use care.

The Kaiser survey shows a steady increase in companies offering high-deductible plans, which come with lower premiums but make consumers pay more for care. This insurance is often paired with health savings accounts that let people save pretax for medical expenses.

Altman said he expects that trend to continue growing as employers try to control premiums.

"This is the main tool that employers have in the toolbox right now, so we're going to see more and more high-deductible plans with bigger and bigger deductibles," he said.

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