Health insurance premiums up 6.1%, fast outpacing inflation and wages

Even though premiums grew at a slower pace than the year before, voters are worried about health care costs and access.

By Doug Trapp, AMNews staff. Oct. 1, 2007.

Washington -- The rising cost of health insurance continues to drive a slow but steady decline in employer-sponsored coverage and an increase in the number of uninsured people, according to the authors of an annual employer survey.

Premiums increased 6.1% on average in 2007 -- the slowest rate since 1999, according to the "Survey of Employer Benefits 2007" by the Kaiser Family Foundation and the Health Research & Educational Trust. But that figure is more than twice the 2.6% rise in inflation and outstrips the 3.7% boost in workers' earnings.

"We are not falling off a cliff," said Gary Claxton, a co-author of the report and a vice president and director of the Health Care Marketplace Project at the Kaiser Family Foundation. "But we are witnessing a slow but certain long-term erosion of our employer-based system."

While 99% of businesses with more than 200 employees offer health benefits, only 59% of firms with fewer than 200 workers do so -- down from 68% in 2001, according to the report, which surveyed 1,997 employers.

There's no scientific point at which health insurance becomes unaffordable, said Drew Altman, PhD, president and CEO of the Kaiser Family Foundation. "But it does seem like we've crossed a threshold where health insurance is just unaffordable for more employers, particularly medium-sized employers and especially smaller employers and for average people each year."

Low-wage workers and many small-business employees feel the most pain from health insurance costs, Claxton said. For example, 37% of workers in firms with three to 199 employees pay more than half the cost of family plan premiums. That decreases to 5% for workers in businesses with more than 200 employees. "This tells you how much you might have to struggle to try and keep up with the average cost of family coverage at a small firm," Claxton said.