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NEWS RELEASE
Sep 06, 2002


CONTACT: Jerry Flanagan, (415) 633-1320

Health Care Costs Increase 27% for Employees

FTCR Calls on State Legislature to Enact New Laws Requiring 'Prior Approval' for Health Insurance Premiums
SAN FRANCISCO. A new report released by the Kaiser Family Foundation and the Health Research and Educational Trust (HRET) found that out-of-pocket health care costs have increase 27% over 2001 levels for some employees. The report also found that while employer costs have increased by 12.7% -- the largest annual increase since 1990 -- more workers have experienced a decrease in benefits. The Foundation for Taxpayer and Consumer Rights (FTCR) has recently called for an investigation into unfair rates in response to a Goldman Sachs report projecting increased health insurer profits through 2006. The Goldman Sachs report cited evidence demonstrating that the health care industry has strategically raised premiums despite the fact that health care claim values have decelerated.

"It is unconscionable that HMOs continue to gouge businesses and consumers with high premiums while health care benefits decrease," said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights. "State regulators should examine unfair rate setting in HMO premiums. State legislators should realize that HMOs are raising premiums to increase their own profitability at the expense of patient health."

In a recent Goldman Sachs report, managed care analyst Charles Boorady predicted that HMO profitability will continue to increase. "The tipping point of the current up cycle [for managed care profitability] is at least 2 years away," said Boorady. Managed care companies, according to Business Wire/Health Wire release, will continue to experience profit growth "due to premium acceleration and medical cost deceleration."

According to the Kaiser/HRET report:

*Employer health care premiums have increased 12.7% in the last year. Annual premiums for individual health coverage are $3,060 and $7,954 for family coverage on average.

*Employee share of health care costs, in the form of co-pays and deductibles, has increased 27% over 2001 levels for single coverage and 16% for family coverage.

*While premium costs increase, health care benefits continue to decrease. 17% of insured employees experienced a decline in benefits since 2001.

*53% of employers responding to the survey thought that rising health care costs are their "greatest cost concern."

"As the economy slows employers will require workers to pay more out-of-pocket for health care benefits," said Flanagan. "Consumers will continue to pay more money for fewer benefits."

FTCR has recommended that state regulators adopt a "prior approval" for health care premiums similar to systems in place for auto and home insurance. Such systems require insurers to receive approval from state agencies before raising rates.

"Health insurers have used phony arguments that equate premium increases with increased medical costs," said Jerry Flanagan. "In fact, HMOs are only concerned with their own profit margins and are raising rates despite a slow-down in medical costs."

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