U.S. health premiums rise; Nevada’s hike not as sharp

Michelle Swafford

Thursday, Sept. 9, 2004 | 11:05 a.m.

U.S. employer-sponsored health insurance premiums rose at a double-digit pace for the fourth consecutive year in 2004, but in Nevada insurers say the rate increases are less steep.

Employer-sponsored insurance premiums for self-funded and traditional plans rose nationally 11.2 percent from spring 2003 to spring 2004, which is a smaller increase than from spring 2002 to spring 2003 when premiums rose 13.9 percent, the Kaiser Family Foundation and Health Research & Education Trust reported today. In comparison, the rate of inflation increased 2.3 percent in 2004 and workers' earnings rose 2.2 percent.

The annual employer health benefits study looks at employers with three or more employees.

"The cost of family health insurance is rapidly approaching the gross earnings of a full-time minimum wage worker," Kaiser President and CEO Drew Altman said in a statement. "If these trends continue, workers and employers will find it increasingly difficult to pay for family health coverage and every year the share of Americans who have employer-sponsored health coverage will fall."

In 2004, 61 percent of employers surveyed provided health care coverage for their employees, down from 65 percent in 2003 when more small businesses offered health insurance, the Kaiser Family Foundation said.

This year's premium averaged $9,950 annually, or $829 per month, for a family of four. Employees paid an average of $2,661, which is a 10 percent increase in the total employee contribution from 2003, the report said.

The premium for individuals was $3,695 for 2004, or $308 per month. Employees paid an average of $558, which is about the same total employee contribution for individuals as in 2003.

The percent of the premiums that employees paid in 2004 remained constant at 16 percent for individuals and 27 percent for families.

Many employers are shopping for alternatives and passing on more of the health costs to employees through higher deductibles, co-payments and employee contributions, the study said. Some employers surveyed said they have reduced coverage because of the escalating costs.

Most employers require their employees to pay a deductible before their benefits apply, the study said. In preferred-provider organizations, which cover more than half of all employees, the average deductible remained constant in 2004 from a year ago at $287 for services obtained from network providers and $558 for services from non-network providers. About half of the 1,925 employers surveyed said they require a separate average deductible of $224 for hospital stays.

Nevada insurers say their premium increases in 2004 were lower than what Kaiser reported nationally because Southern Nevada is a highly competitive market and has a smaller group of health care providers than in other markets.

Nevada insurers also said that employers changed health plans and passed more of the cost onto employees than in the past in an effort to reduce costs.

Jeff Terrill, president and general manager of Cigna Corp.'s Arizona and Nevada operations, said employers are stressing that employees get involved with their health care decisions by requiring higher co-payments and deductibles so employees will think about whether a specialist or emergency room visit is necessary.

Employees also have to consider whether they want a cheaper co-payment and a generic drug or the brand name at a higher price, he said.

"All the sudden we've seen a shift in the utilization of less expensive, but equally effective drugs," Terrill said.

Involving employees in the decision process has decreased Cigna's claims costs by about 33 percent in the past three years, he said.

Without changes in health plans, Cigna's customers are seeing a 12 percent increase in premiums this year, but many employers are switching plans to control costs, Terrill said.

Las Vegas-based Sierra Health Services Inc. said the average premium increase in 2004 was between 8 percent and 9 percent.

"That's about the same from last year," Sierra spokesman Peter O'Neill said. "We haven't seen a huge spike in our costs."

He said the insurance industry saw a reduction in pharmacy costs in 2003 because many popular drugs such as allergy-reliever Claritin became available over the counter, while other brand name drugs had generic equivalents become available.

Greg Russell, executive director of actuarial services for Anthem Blue Cross Blue Shield of Colorado and Nevada, said Anthem's premiums in Nevada increased between 6 percent and 8 percent in 2004, which is a reduction from the prior year.

Earlier this year, the company reduced its small group rates by 14 percent and its large group rates by 5 percent to be more competitive in the area.

"In Nevada it's a pretty competitive landscape," Russell said. "There's more competitive pressures to keep rates down. You have a very dominant player with Sierra Health Services that runs at a very reasonable cost."

Anthem's rates in the Las Vegas Valley are similar to other markets with slight variations, but the valley has fewer employees who purchase health insurance for their families than in other areas, Russell said.