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Average premiums for employee health plans rise 4 percent

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Annual premiums for job-based family health insurance went up just 4 percent this year, but that's no comfort with the price tag approaching $16,000 and rising more than twice as fast as wages.

The annual survey released Tuesday by two major research groups served as a glaring reminder that the nation's problem of unaffordable medical care is anything but solved.

Premiums for a family plan are averaging $15,745, with employees paying more than $4,300 of that. And lower wage workers are paying more for skimpier coverage than their counterparts at upscale firms.

Overall, "it's historically a very moderate increase in premiums," said Drew Altman, president of the Kaiser Family Foundation, which conducted the survey with the Health Research & Educational Trust.

He quickly added: "But even a moderate increase feels really big to workers when their wages are flat or falling." General inflation rose only 2.3 percent, by comparison.

Following a 9-percent hike in premiums last year, the 2012 increase quickly became fodder for the political debate. Republicans said President Barack Obama's promises to control health care costs ring hollow in light of the findings.

But the most significant cost-control measures in Obama's law have yet to take effect, along with the president's big push to cover the uninsured. The cost controls include a new tax on the most expensive insurance plans and a powerful board to keep Medicare spending manageable.

Trying to head off critics, the administration issued a report estimating that consumers have saved $2 billion as a result of the health care law. That's due to a combination of insurance rebates for employers and individual policy holders, as well as closer state oversight of proposed rate increases, facilitated by Obama's law.

But hang on to your wallets: The Kaiser survey showed premiums for job-based family coverage have risen by nearly $2,400 since 2009 when Obama took office, with a corresponding increase of nearly $800 for employee-only coverage.

"We aren't happy to see any increase in health insurance premiums," said Gary Cohen, head of the administration's Center for Consumer Information and Insurance Oversight, adding that officials are "heartened" it was only a modest rise this year and look forward to slowing costs as more provisions of the health care law take effect.

Most independent experts say rising premiums reflect underlying problems with the health care system that have frustrated policymakers of both parties for years, as well as corporate benefit managers.

Indeed, only last week an arm of the National Academy of Sciences estimated that about 30 cents of every dollar spent on health care — $750 billion a year — is wasted through unnecessary procedures, cumbersome paperwork, uncoordinated care and fraud.

Obama says he's working to make health care more affordable for all by leveraging the power of government programs like Medicare to pay hospitals and doctors for quality results, rather than sheer volume of tests and procedures. But that will take time.

Republican Mitt Romney wants to give future retirees a fixed amount of money to pick either private insurance or a government plan modeled on Medicare. He expects the private market will find ways to deliver quality service at lower cost. The GOP approach mirrors the shift away from traditional pensions, which pay a standard benefit, to 401(k) savings plans that limit the employer's exposure.

The Kaiser/HRET survey found that employee-only coverage went up 3 percent this year, with annual premiums averaging $5,615. Companies usually pick up a larger share of the cost for employee-only coverage, so workers typically paid about $950 of that.

The availability of employer-based coverage, the mainstay for working people and their families, remained stable this year, with 61 percent of all companies offering health benefits. However, only half of companies with 3 to 9 workers offered health insurance, while virtually all large firms with 1,000 or more employees did so.

Companies continued shifting costs to their workers, at a somewhat slower pace. A trend toward steering employees into plans with high annual deductibles eased a bit. The deductible is the amount you must pay each year before insurance kicks in. The survey found that 34 percent of workers are in plans with annual deductibles of at least $1,000 for single coverage, up from 31 percent in 2011.

"We don't know if it's a timeout, or if it's reached some natural limit," said Altman. "It's really something to watch for in the future because (high deductible plans) have an impact both on people's budgets and on holding down overall costs."

The survey's focus on health insurance provided to lower-wage workers highlights one of the major areas of uncertainty around Obama's health care law.

If the president is reelected and the law goes into full effect, employers with lots of low-wage workers may be tempted to drop coverage and send their employees into new state-based insurance exchanges, markets that will offer taxpayer-subsidized private insurance. A separate survey this summer by the Mercer benefits consulting firm found that 9 percent of employers in the retail and hospitality industries say it's likely they will drop coverage, even if they have to pay penalties to the government.

The survey found that workers in lower-wage companies pay $4,977 toward the cost of family coverage, as compared to an average of $4,316 for all workers. And the policy they get for their money is less generous, typically worth about $1,000 less.

"They are really paying more and getting less," said Altman.

Most experts believe the sluggish economy provides the likeliest explanation for the moderate rise in premiums. Last year's spike was blamed on a mistaken bet by insurers that the economy would recover faster.

The survey includes more than 2,000 small and large employers. Asked what kind of increase they're expecting for 2013, employers said their best estimate at this point is 7 percent — sure to prompt more pain.

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  • Sour Linda
    Well since from my experience most of the state workers are undriven, non-productive, and poor escuses for employees I feel no empathy toward the plight. The Dems just love these types because it keeps them in votes!
  • Thank-you-Mitch
    This rating system has been flawed from the day the Daniels administration put them in place. The only people who get 'average ' or 'above average' are Mitch's lapdogs. Hope Greg is in and a real accounting of the State is done.
    • Poor Patti
      As a state employee you are already privy to better wages and benefits than most of the taxpayers that support you. These cost are a direct result of overuse of the medical system by barely ill individuals and the abuse by the illegal immigrants who saturate our state. If that kushy state(mosty likely union) job is too much for you to handle then quit and join us out here in the private sector, where merit and performance do count.
    • Stretching the Truth
      Patti may be stretching the truth a bit. She is rated accordingly on her performance and is paid according to work completed. The State's benefit plans are on par with other private organizations in Indiana and contributions to HSA accounts are even above the norm. Patti is always more than welcome to explore other employment options if unsatisfied with the State of Indiana.
    • Health Insurance
      I work for the state of Indiana. Each year the state contributes less and less my HSA account and my deductible is increased. My salary on the other hand.......Even though I do superior work, my supervisor isn't permitted to rate my work with anything other than "Meets Standard" so that no more than the minimum raise can be awarded. If she were to rate me as above average or outstanding, her supervisor would require her to change it...so she doesn't even bother. Yes, she's admitted this to me, but would have to deny it in public or risk losing her job. I've asked her to rate me as I deserve and let her supervisor tell her to change it and then document it, but she won't do it.

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