By Laura Meckler
Associated Press
WASHINGTON — Premiums people pay to carry health insurance are going up even faster than the cost of health care itself, according to a private analysis released Wednesday.
At the same time, larger hospital bills and rising prices for prescription drugs drove last year’s large jump in health care costs, the report by the Center for Studying Health System Change said.
Last year, premiums increased 11 percent, the report said.
That’s because insurance companies expect continued cost increases and are trying to make up for profits lost in the late 1990s when they cut expenses to gain market share, the report said.
In recent years, employers have absorbed much of the blow of higher premiums. But with the softening economy, Ginsburg said most expect employers to pass some of the increases on to their workers.
Employers may wind up cutting back on worker health plans or dropping coverage altogether, said Kate Sullivan, director of health care policy for the U.S. Chamber of Commerce. "Employers can’t continue to absorb record health care premium increases and remain competitive."
The cost of health care grew 7.2 percent last year, the largest increase in a decade. The cost of hospital care accounted for nearly half the increase, the report said.
Hospitals were able to raise their prices as employers gravitated toward looser forms of managed care.
In such systems, which give patients more choice of hospitals and doctors, a health insurance plan is likely to lose business if its network does not include the most popular hospitals, said Paul Ginsburg, the center’s president and a co-author of the annual study.
"There has been a change in the balance of power between hospitals and health plans," he said.
A spate of hospital mergers has lessened competition, giving the companies that remain more leverage in negotiations with the plans. And with fewer open beds, each hospital is less dependent on any one plan’s patients, Ginsburg said.
Hospitals, squeezed by low Medicare payments, also are increasingly aggressive about making money through their private contracts, he said.
New technology and sharp wage increases, partly in response to the nursing shortage, also are driving up hospital bills.
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