Health-insurance premiums outpacing wages, inflation

The average family premium for health insurance offered through an employer surpassed the $13,000 mark this year, and the cost of coverage continues to outpace increases in wages and inflation, according to a report released Tuesday.

The average annual premium rose 5 percent in 2009, similar to the prior year's increase and considered modest compared with double-digit increases earlier this decade. Over the past 10 years, premiums have risen 131 percent while wages have increased just 38 percent. In that time, inflation has gone up 28 percent.

The report by the Kaiser Family Foundation and the Health Research and Educational Trust, based on a survey of more than 3,100 U.S. firms earlier this year, comes at a time when the country is embroiled in a debate to overhaul its health-care system by building upon the existing employer-sponsored model.

The report found that if premiums to cover families increase by 6.1 percent, the average growth over the past five years, they will exceed $24,000 a year by 2019 — a level many health experts consider unsustainable without efforts to rein in costs.

"When health-care costs continue to rise so much faster than overall inflation in a bad recession, workers and employers feel the pain. That's why we are having a health-reform debate," said Drew Altman, president and chief executive officer of the Kaiser Family Foundation, based in Menlo Park, Calif.

The average annual cost of coverage hit $4,824 for an individual and $13,375 for a family this year, according to the survey.

About 60 percent of employers offered health benefits this year, down from 66 percent in 1999. While 8 percent of employers said they were "somewhat" or "very likely" to drop coverage, more than 40 percent planned to increase the amount employees pay toward their premiums.

Meanwhile, the amount workers contribute to their health coverage has continued to go up while their benefits have decreased. Over the past decade, worker contributions have increased 128 percent, to $3,515 a year for family coverage.

Employers generally pay 74 percent of the cost of coverage, with smaller firms contributing less.

The report shows that a reform bill should include a provision that regulates increases in health-insurance premiums if the legislation also requires Americans to buy health-insurance policies, according to a consumer group. The proposals in Congress require Americans to have insurance and requires employers over a certain size to provide it or contribute to the cost of coverage.

"The current legislation would actually encourage insurance companies to raise rates in order to increase profits," said Jerry Flanagan, health-policy analyst with Consumer Watchdog, which is based in Santa Monica. "If the government is going to require all Americans to buy health insurance, then the government has the responsibility to make insurance affordable."