- The Washington Times - Wednesday, September 14, 2005

The climbing cost of insurance forced more companies to stop offering health care benefits to employees this year, according to a new report.

About 60 percent of U.S. businesses offered health care benefits this year, down from 63 percent in 2004, said the annual report released yesterday by the Kaiser Family Foundation of Menlo Park, Calif., and the Health Research and Educational Trust, an arm of the American Hospital Association.

Most companies surveyed cited high insurance rates as their main reason for not offering health benefits.

Health insurance premiums jumped 9.2 percent on average this year on top of an 11.2 percent average increase last year, said the report, which surveyed 2,995 public and private employers.

“What we see is the slow but perceptible fraying and deterioration of our employment-based health insurance system,” Drew Altman, president of the foundation, told reporters yesterday.

Although the pace of insurance cost increases slowed this year, it easily beat the general inflation rate of 3.5 percent and also outpaced workers’ earnings, which increased 2.7 percent, the report said.

The report warned consumers not to expect a slowdown in health insurance rates.

“There is little indication this figure will decline much more,” said Jon Gabel, co-author of the study.

Most of the businesses that dropped coverage were smaller companies. Only 47 percent of companies with three to nine workers offered health benefits, while 98 percent of companies with at least 100 workers offered coverage.

Although the cost of insurance was a primary factor, some businesses said they were too small to negotiate lower rates from insurers or their employees received coverage through other means, the report said.

Gerry Shea, spokesman for the AFL-CIO, said yesterday that international competition in the past decade has forced U.S. companies to replace traditional health care coverage with limited health benefits for workers.

Among other highlights of the report:

• Most workers — 61 percent — were covered by preferred provider organizations (PPOs) in 2005. Consumers covered by health maintenance organizations (HMOs) dropped from 25 percent in 2004 to 21 percent this year.

• The average employee this year contributed $610 of the $4,024 annual cost for single coverage and $2,713 of the $10,880 annual cost for family coverage.

• One in five employers offered a high-deductible health plan this year, up from 10 percent of companies in 2004.

Companies have shifted more of their health care costs to workers in the past few years, and that cost-shifting is expected to continue in 2006, according to Mercer Human Resource Consulting LLC, a New York consulting firm.

American companies plan to increase their health care spending an average of 6.4 percent, even though a bigger increase is needed to maintain current benefits, Mercer said in its report released Tuesday.

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