Insurance Rates Skyrocket In 2002

Three-fourths of all insurance plans surveyed recorded double-digit cost increases in the second half of 2002.    Small plans, 50 or fewer employers, saw the largest increase, with 78% reporting premium increases from 10% to 30% and 14% reporting premium hikes between 30% and 50%.  

Medium-sized accounts, 51 to 100 employees, saw similar large increases.    Seventy-four percent experienced rate premium increases between 10% and 30%, while 12% increased 30% to 50%.  

However, larger accounts, 501 or more employees, fared slightly better.    Seventy-four percent saw premiums increase 10% to 30%, but 18% saw increases of less than 10%.   Compared to other sized plans, only 3% of large accounts saw premiums go up 30% to 50%.  

“This survey shows that employer-sponsored health insurance is under stress as never before due to the seemingly unstoppable escalation in the cost of medical care,” said Ken Crerar, president of The Council. “It is critical that players on all levels come together and address this problem before one of the hallmarks of the American workplace is damaged beyond repair.”

In the midst of rising medical insurance premiums, group life insurance rates appear to have held steady or increased only a small amount in the second half of 2002. Forty-eight percent of the small accounts, 47% of the medium accounts and 54% of the large accounts experienced no change in group life rates.

Increases in group life rates were small; the survey showed 36% of the small accounts, 20% of the medium accounts and 15% of the large accounts had premium increases of less than 10 percent. Additionally, 23% of medium and large accounts saw their group life premiums actually drop.

The survey found companies were dealing with rate increases by shifting cost to employees and cutting back benefits.   Other cost-saving market trends were also identified:

• A shift away from Health Maintenance Organization (HMO) contracts to Preferred Provider Organizations (PPO)
• More employers asking employees to share the cost of network provider bills, in addition to co-pays for office visits
• An increase in the maximum out of pocket expense
• Eliminated non-network coverage
• Less expansive basic coverage, with larger deductibles giving employees the option to “buy down” benefits and improve their coverage, by paying a larger portion of the cost.

Full results of the survey can be found on the Council’s Web site www.ciab.com/resources/docs/fall02_eb_marketsurvey_all.doc .