Health premiums rising at more than twice the inflation rate

By ALISSA J. RUBIN

Los Angeles Times

WASHINGTON --- The price of health insurance premiums has jumped ahead nationally at more than twice the rate of general inflation, according to a survey of employers.

The 4.8 percent average hike nationwide, while far short of the double-digit increases common in the 1980s, was the largest in five years.

The survey by the Kaiser Family Foundation and the not-for-profit Health Research & Education Trust found significantly higher premium increases for small employers: 7 percent for companies with fewer than 200 workers and 9 percent increases for the smallest companies - -- those with nine workers or fewer.

The increases, which will be implemented Jan. 1, come after years of minor or no hikes, as managed-care companies competed intensely for members and kept premium prices down. Last year, many health maintenance organizations reported declines in profits and even losses in some cases, and blamed them on flat premiums.

Last year, many plans began raising rates; in California by an average of 10 percent in 1999 and 2000. Several companies that had been struggling posted improved earnings.

There have been some signs of a growing backlash to higher premiums among major corporations that are the biggest purchasers of insurance.

Premium costs are rising most swiftly in indemnity, or traditional, insurance plans and preferred provider plans, which typically allow patients the greatest choice of doctors and hospitals and put the fewest limits on their access to services, according to the survey.

In HMOs, which generally put tighter limits on access to health services, costs are rising at slower rates.

The longstanding trend away from indemnity coverage and into managed care is continuing, the survey found. The number of consumers in indemnity insurance plans is plummeting --- just 9 percent were in such plans in 1999 compared to 73 percent in 1988. In the same period, HMO membership grew gradually to a high of 31 percent in 1996, but since has dropped to 28 percent.

"In the last couple of years people were able to shift out of HMOs and into PPOs because we had unprecedented price stability and a strong economy," said Jon Gabel, vice president of the Health Research & Education Trust.

Gabel said he expected that prices would continue to rise next year and the number of consumers in traditional indemnity plans would continue to drop.

Despite the robust economy, the survey detected no increase in the number of employers offering health insurance to their workers.

Copyright 1999
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