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Health premium costs still rising, but not as sharply

by on
in Compensation and Benefits,HR Management,Human Resources

When it comes to health insurance premiums, the good news is relative.

It's true that premiums rose less in 2005 than the previous four years. This year's 9.2 percent average premium

increase is down from last year's

11.2 percent average, and it ended four consecutive years of double-digit

increases, according to a new Kaiser Family Foundation survey. But that growth rate is still two-and-a-half times the inflation rate (3.5 percent). Since 2000, premiums have risen by 73 percent.

Annual premiums for family coverage reached $10,880 in 2005, with the average employee paying $2,713 (or 26 percent of the total premium). Annual premiums for single employees averaged $4,023, with employees contributing an average of $610. Find details on the survey at www.kff.org /insurance/7315/index.cfm.

2006 outlook: If employers simply renew their current medical plans, their average premium increases will run about 10 percent in 2006, according to a new Mercer HR Consulting survey.

But employers will continue to turn to cost-shifting and other plan-design changes to cut into that 10 percent hike. As a result, employers in the survey are budgeting for actual employer spending increases of 6.4 percent next year. Look for more employers in 2006 to switch to higher deductible policies coupled with federal health savings accounts, plus employers will continue to ask employees to shoulder more of the cost burden.

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