Health premiums: Feeling the pain

Health care premiums in employer-sponsored plans rose an average of 6.1 percent in 2007, the slowest growth in several years, but still far outstripping growth in workers' wages and overall inflation.

It's the slowest premium growth since 1999, according to a closely watched national report released Tuesday by the Kaiser Family Foundation and the Health Research and Educational Trust, two nonprofit research groups.

That's cold comfort for companies and their employees who've felt the cumulative effect of years of premium increases.

"The more we have to put in benefits, the less we can pay employees," said Paul Pelletier, director of business operations at Providers Choice Inc., a Hopkins company with 47 workers.

Providers Choice administers a federal food program for thousands of home child and day care providers and also offers training for them. The company has been trying to save money by automating some functions while also holding off updating equipment such as computers, Pelletier said.

So far, the firm has been lucky. It hasn't had any catastrophic illnesses, which would spike premiums. If that happened, it might have to contemplate paring benefits, he said.

While small employers such as Providers' Choice are most vulnerable to rising health costs, the pain is felt across the economy.

Kaiser surveyed more than 3,000 randomly selected firms with three or more employees between January and May.

Since 2001, premiums for family coverage have increased 78 percent, while wages have gone up 19 percent and inflation 17 percent. The average premium for family coverage in 2007 is $12,106 and employees on average pay $3,281 to cover their share.

About 60 percent of companies continue to offer health coverage to some of their workers, about the same as last year. Large firms are most likely to do so and small firms the least likely.

Almost all firms with at least 200 workers offered benefits in 2007 but fewer than half of those with three to nine workers did so.

Consumer-driven plans

Despite a lot of talk about so-called consumer-driven health plans, such plans cover only about 5 percent of all insured workers, compared with 4 percent last year.

The report's authors said new products usually take a while to catch on. The new plans typically offer a lower monthly premium but a high deductible. They're paired with a health savings account, where employees -- and sometimes employers -- deposit pretax dollars to be used for medical expenses.

"The Achilles' heel is employee take-up," said Jon Gabel, a senior fellow at the National Opinion Research Center at the University of Chicago, who co-authored the report. "They don't understand it and they're intimidated by the deductible."

While the authors did not break out regional numbers for consumer-driven health plans, they said the plans were most popular in the Midwest.

Slumberland's choices

Slumberland Inc., a chain of furniture stores based in Little Canada, expects to introduce a health savings account in the next two to three years, said benefits manager Lisa Tepley.

Slumberland offers health benefits to two-thirds of its 1,200 employees. Of those, about 65 percent take it up, while others may opt to go with a spouse's plan.

The company offers two plans, one with a $400 deductible and another with a $1,200 deductible. The second option eventually will be paired with a health savings account.

"We are just at the beginning stages" of educating employees on what that entails, Tepley said.

Kaiser officials warned that the slower premium growth in 2007 probably is a temporary phenomenon.

"We're in a period where insurance profits are up, hospital profits are reasonably healthy, there are not a lot of new blockbuster drugs which are expensive, and there's also a lot of cost-shifting [from employers to employees] which has an effect," said Drew Altman, president of the Kaiser Family Foundation.

But "these periods, we know, don't last," Altman said, adding that new medical technology will continue to drive up costs.

Chen May Yee • 612-673-7434

Chen May Yee • mychen@startribune.com