Health Insurance Costs Surge in 2011, Survey Says

September 27, 2011 - 12:45 PM

INDIANAPOLIS (AP) — The cost of employer-sponsored health insurance surged this year, snapping a trend toward moderate growth, but experts say these increases may slow again in 2012.

Annual premiums for family coverage climbed 9 percent and surpassed $15,000 for the first time, according to a report released Tuesday by the Kaiser Family Foundation and the Health Research and Educational Trust. Premiums for single coverage rose 8 percent compared to 2010.

That growth compares to increases last year of 3 and 5 percent for family and single coverage, respectively.

The study does not delve into why rates jumped in 2011, but foundation CEO Drew Altman said a number of factors may have played a role. He noted that health care costs continue to rise. Insurer profits and the health care overhaul also have some impact.

Companies and workers split premiums for employer-sponsored coverage, the most common form of health insurance in the United States.

Businesses likely reacted to these cost increases by freezing retirement account contributions or giving a flat wage or smaller increase to their workers, said Helen Darling, CEO of the National Business Group on Health, a nonprofit organization that represents large employers on health care issues.

"(Workers) basically are giving their pay raise to the health system," said Darling, who was not involved with the Kaiser study. "It's really bad news."

The annual study was conducted earlier this year and includes results from more than 2,000 companies across the country. It also indicates that many more families than previously believed have benefited from a popular provision in President Barack Obama's health care overhaul allowing young adults to stay on a parent's health plan until they turn 26.

Kaiser asked employers how many people were added to their insurance plans because of this provision and estimated that 2.3 million young adults enrolled. Last week the government had reported that the number of uninsured young adults had dropped by nearly 1 million since the law took effect, a finding independently corroborated by Gallup.

The difference isn't necessarily a contradiction.

The Kaiser survey may have counted young adults who were covered by a more expensive policy and switched to their parent's plan to save money.

The overhaul aims to eventually cover millions of uninsured people. Altman said initial provisions from the law, which was passed last year, added about 1.5 percent to this year's premiums, which is about what many insurance analysts and benefits experts expected.

Many workers are about to receive notices from their employers regarding health insurance coverage for next year. Altman said he cannot say whether this year's increase represents a bad omen for 2012 or if it is just a one-year blip.

Insurers have been saying for months that health care use has grown more slowly this year, something industry observers pin on the sluggish economy. Altman and other benefits experts say that could lead to lower premium increases next year, since insurers base their rates in part on how often people use care.

Benefits consultant Mercer said earlier this month an employer survey it did shows that 2012 health insurance costs will rise by the smallest amount since 1997.

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Associated Press writer Ricardo Alonso-Zaldivar contributed to this report from Washington, D.C.