Health Premium Growth Slows to 4.5% in U.S., Kaiser Says

Growth in the health insurance premiums charged by companies including UnitedHealth Group Inc. (UNH) and WellPoint Inc. (WLP) has slowed to 4.5 percent this year, less than half of 2011’s rate, the Kaiser Family Foundation said.

The average cost for a family plan obtained through an employer jumped this year to $15,745 from $15,073 in 2011, when premiums rose 9.5 percent, the Menlo Park, California-based research group said today after surveying more than 2,000 companies. Premiums, a cost typically shared by employers and employees, have doubled in the past decade, three times the gains in wages and inflation, according to Kaiser.

“This year’s 4 percent increase qualifies as a good year, but it still takes a growing bite out of middle-class workers’ wages, which have been flat or falling in real terms,” Drew Altman, president and chief executive officer of the foundation, said in a statement.

The lumbering recovery from the 18-month U.S. recession that ended in June 2009 is responsible for most of the slowdown in premium growth and health spending, Altman said. Increases in employee cost-sharing that companies have enacted in recent years may also be damping demand for health services, said Gary Claxton, a Kaiser vice president and lead author of the study.

“When the economy is still poor, people are reluctant to spend money,” Claxton said in a telephone interview.

The largest insurers have seen profit and revenue advance. UnitedHealth, the biggest U.S. health plan, boosted earnings by about 16 percent in the past year and WellPoint, the second- largest, saw a 4.6 percent jump, according to data compiled by Bloomberg.

‘Competitive Pricing’

Still, health plans have said they face more pressure from employers and rival insurers to keep premiums down.

“We’re seeing competitive pricing,” particularly among large and medium-sized employers, Jay Gellert, the chief executive officer of Woodland Hills, California-based Health Net Inc. (HNT) told investors at a Morgan Stanley conference in New York yesterday.

President Barack Obama’s 2010 health-care overhaul, which will expand coverage while putting restrictions on commercial pricing, will also have an impact when the law takes full effect in 2014, Wayne Deveydt, the chief financial officer at Indianapolis-based WellPoint, said during another presentation.

“It’s important for investors to begin to get their head around the fact that commercial as it exists today will look very different in 2014 and that margins will be substantially lower than they are today, but the volume will be substantially higher,” he said.

2010 Overhaul

The survey found a leveling off of growth in enrollment in plans with high deductibles and cost-sharing, “which is one of the forces that may be holding utilization down,” Altman said on a conference call with reporters. Premiums may begin to grow faster if plans with high out-of-pocket costs fall out of favor with employers, he said.

Donald Nathan, a spokesman for Minnetonka, Minnesota-based UnitedHealth, and Kristin Binns, a WellPoint spokeswoman, didn’t immediately return messages seeking comment on Kaiser’s report.

“Health plans are doing everything they can to keep coverage as affordable as possible for the millions of individuals, families, and employers they serve,” Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s lobbying group in Washington, said in an e-mail. “Data clearly demonstrate that premiums track directly with the underlying cost of medical care.”

The Affordable Care Act that overhauled the nation’s health-care system will require all companies with 50 workers or more to offer insurance or pay fines of as much as $3,000 per worker beginning in 2014. About 61 percent of employers offered insurance this year, unchanged from 2011, Kaiser said.

The U.S. Census is scheduled to release a report tomorrow showing the number of people without health insurance following legislative and policy changes meant to expand coverage. There were 49.9 million people in the U.S. without coverage in 2010.

To contact the reporters on this story: Alex Wayne in Washington at awayne3@bloomberg.net; Alex Nussbaum in New York at anussbaum1@bloomberg.net

To contact the editor responsible for this story: Reg Gale at rgale5@bloomberg.net