Health care costs grow, worker coverage shrinks

Two separate studies released Aug. 3 show that the steadily escalating cost of health care benefits clearly has reduced the number of workers who receive health care coverage through employers.

"As health insurance costs continue to escalate, it is likely the level of coverage will continue to decline. The increasing cost burden is making it progressively more difficult for employers to compete," said Ed Potter, president of the Employment Policy Foundation (EPF), a Washington, D.C.-based research group.

One of the studies released by the EPF revealed that, during the past year, the cost of employee health insurance has edged out paid leave as the most expensive benefit for employers. The foundation's analysis of data from the U.S. Bureau of Labor Statistics found that health insurance benefits accounted for 23 percent of non-wage employee compensation in the first quarter of 2004.

According to the EPF researchers, this marks the first time health care has surpassed paid leave as the most expensive employer-provided benefit. Leave benefits, including paid vacations and sick time, were the second most expensive benefit, accounting for 22.6 percent of non-wage employee compensation.

Potter said that at some point the cost increases will hit a breaking point where employers cannot afford to spend any more on providing health benefits. There are some indications that level is approaching. Another report, released by the Center for Studying Health System Change (HSC), a nonpartisan research organization in Washington, D.C., found that a growing number of employers are opting to reduce or even eliminate health care benefits.

The study concludes that last year 63 percent of employees in the U.S. workforce received their health insurance through employers, down from 67 percent of the workforce in 2001. The proportion of the U.S. population under the age of 65 and in a family with at least one worker dropped from 84.2 percent in 2001 to 81.4 percent in 2003. Approximately 9 million fewer people now receive health care coverage through employer-provided benefits.

"While the economic downturn reduced employment and accounted for much of the decline in employer coverage, the rapidly rising cost of health insurance, which increased about 28 percent between 2001 and 2003, likely contributed to the decline as well," said Bradley C. Strunk, a health care researcher and co-author of the HSC's 2003 Community Tracking Study Household Survey.

With the elections fast approaching in November, don't expect any comprehensive reforms or proposals to contain costs to be launched in Congress until next year, said Lisa Horn, manager of health care for the Society for Human Resource Management's Governmental Affairs department.

According to Horn, there are proposals on Capitol Hill that could help to reduce some of the cost increases, but none of them is a sweeping reform plan. In July, the Senate passed the Patient Safety and Quality Improvement Act, which some say could help reduce patient costs. The House passed its version of the bill earlier this year by a voice vote, and the legislation is in a conference committee to reconcile the differences between the versions.

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