More U.S. Workers Go Uninsured

Rising health premiums are prompting firms to drop coverage or employees to forgo it, an annual survey shows.
By Daniel Yi
Times Staff Writer

September 27, 2006

Health insurance premiums for American workers and their employers continue to rise faster than inflation and wages, straining companies' ability to offer coverage and leaving a growing number of workers uninsured, according to a survey released Tuesday.

Premiums rose by 7.7% in the last year, more than double the rate of inflation or increase in income, according to the Kaiser Family Foundation and the Health Research & Educational Trust, which sponsor the report.

The number is the lowest growth rate in the last six years and the third straight year that the rate has declined from a high of 13.9% in 2003, but "nobody should be celebrating," said Drew Altman, chief executive of the nonprofit foundation.

Altman and the survey's authors noted that overall premiums had risen 87% over the last six years to an average of $11,480 annually for family coverage, more than what a minimum-wage worker earns. Employers on average paid 73% of the cost.

The steady increases in rates have led to about 5 million workers' joining the ranks of the uninsured, because their employers stopped offering health benefits — or workers couldn't afford to pay their share of the premiums.

More American workers are facing tough choices like the one that confronted Karen Wynn McCullough recently.

The 36-year-old Baltimore resident and security guard said she declined her employer's health insurance plan when she was hired in May because she couldn't afford it with her $1,800 monthly salary. Then she fell ill with a mouth infection exacerbated by an allergic reaction to antibiotics. Her medical bills approached $3,000.

"The hospital is now suing me," said McCullough, the sole breadwinner for her disabled husband and three children.

Last week she relented and signed up for her employer's health plan for $230 a month.

"It is hard," she said, "but it is something I have to do."

Rising premiums are threatening a pillar of America's health insurance system — employer-subsidized plans. More than half of the American population, 59.5%, was covered under such benefits in 2005, according to the Census Bureau, down more than 4 percentage points from 2000.

"There is this assumption that if you are working you are going to be insured, and that assumption is just not working anymore," said Elise Gould, an economist with the Economic Policy Institute in Washington.

Gould, who is scheduled to unveil her own report on employer-based health insurance Thursday, said the ranks of uninsured were swelling as fewer employers offered health plans. The number of uninsured increased to 46.6 million in 2005, or 15.9% of the population, from 39.8 million in 2000, or 14.1%.

The drop in employer-sponsored plans occurred mainly among small businesses, those employing fewer than 200 workers, according to the Kaiser survey, which covered 3,159 randomly selected firms nationwide.

The proportion of small companies offering health plans dropped from 65% in 1999 to 60% this year. The figure for larger employers — those with 200 or more workers — offering health benefits has held steady at 98% or 99%.

But even among large employers, fewer workers are enrolling in their companies' health benefit plans, according to separate data from the Agency for Healthcare Research and Quality. The government agency reported in August that the number of workers signing up for health insurance with their employers dropped from 87.7% in 1996 to 81% in 2004. The authors blamed rising costs.

"We are moving closer and closer to a tipping point," said Ron Pollack, executive director of Families USA, a healthcare consumer advocacy group. "Any sense that this is just a problem of the poor is disappearing. This is increasingly affecting working families."

Rising healthcare costs, for example, threaten retiree health benefits at some state agencies, according to a report also released Tuesday by the California Healthcare Foundation. The report said that overall public-employee retiree benefits were expected by 2020 to cost more than $31 billion a year and that some agencies might not be able to meet those costs.

The Kaiser survey also noted that a new type of health plan touted by many, including President Bush, as a solution to rising costs was having limited success with employers.

Only about 7% of businesses interviewed said they provided such plans, which offer lower premiums in exchange for higher deductibles and are combined with subsidized savings accounts reserved for healthcare expenses.

Industry observers said it was still too early to say how widespread such plans would become, but Wal-Mart Stores Inc., the nation's largest private employer, announced Tuesday that it would stop offering traditional health plans for new hires next year in favor of low-premium plans with higher deductibles.

Most experts concur that the problem will worsen.

"We are not falling off a cliff," said Jon Gabel, a coauthor of the Kaiser report, but "we are headed down."

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daniel.yi@latimes.com