California Health Insurance Premiums Continue Double-Digit Increases, Rising 11.4 Percent in 2004

Average cost of California family premiums now equals national averages

Health insurance premiums for California workers grew 11.4% in 2004, significantly slower than 2003’s 15.8%, but still the fourth consecutive year of double-digit increases, according to the 2004 Annual California Employer Health Benefits Survey released by the California HealthCare Foundation and Health Research and Educational Trust (HRET).

The California increase of 11.4% in premiums for employer-sponsored health insurance was statistically equivalent to the national average of 11.2% and over six times the California inflation rate of 1.7%. Between 2000 and 2004 premiums have increased 61%.

Historically, premiums in California have been lower than national premiums, but over the past several years they have steadily approached the U.S. average. At $10,013, a typical family policy in California is about the same as the national average of $9,950, the survey found. Single coverage averaged $3,685 in California in 2004, compared to $3,695 nationally. This year for the first time, the average cost for a family PPO plan in California exceeded that of the United States by 15%.

HMOs remained the least expensive type of health plan, costing nearly 30% less for single coverage than PPO plans. About 50% of California workers were enrolled in HMOs in 2004, compared to 25% nationally. However, health plan enrollment in California has shifted somewhat to PPOs over the past year. PPOs increased their market share from 29% in 2003 to 36% in 2004, according to the survey.

The percentage of California employers offering health insurance to their workers was 67% in 2004, about the same as in 2003. As with prior years, firms cited the high cost of coverage as the primary reason they did not offer health benefits.

On average, workers in California contributed $2,580 for family coverage and $474 annually for single coverage in 2004. Compared to 2003 levels, worker contributions grew 5% for family coverage and 13% for single coverage. However, workers’ average share of the premium costs in 2004 fell slightly to 27% for family and 13% for single coverage.

“Health insurance premiums in California continued their double-digit climb and the average cost of a family plan is now the same in California as the rest of the nation. These increases are hard for employers, as well as for working families who have seen their contributions for family coverage go up repeatedly over the past several years,” said Mark D. Smith, M.D., M.B.A., president and CEO of the California HealthCare Foundation.

The California Employer Health Benefits Survey is an independent survey based on the national employer survey conducted annually by the Kaiser Family Foundation (KFF) and HRET. Between 2000 and 2003, KFF conducted surveys in both California and the nation as a whole. Beginning this year, the California HealthCare Foundation (CHCF) assumes sponsorship from KFF of the California survey, which is separate from and not included in the national survey.

“The California HealthCare Foundation’s sponsorship of this special study makes it possible to compare our state with the nation on health care costs and coverage, issues that are very much on the minds of Californians,” Kaiser Family Foundation President Drew Altman said.

A detailed chart pack summary of the survey is available at through the link below. Results of the national survey, which was released in September 2004, are available at

“The annual cost of health insurance for a California family of four is now equivalent to 75 percent of the annual earnings of a fully-employed minimum wage worker. This is one more indicator that the cost of health insurance is prohibitively expensive for many employers and workers,” said Jon Gabel, vice president for Health Systems Studies at the Health Research and Educational Trust and one of the survey directors.

Other survey highlights include:

  • Nearly all large California employers – those with 200 or more workers – offered health insurance and 55% of the smallest companies with 3 to 9 workers provided coverage. Only 20% of California employers offered coverage to part-time workers.
  • Eighteen percent of small firms offered a high deductible health plan (a deductible of more than $1,000 annually for single coverage), compared with just 8% of all large firms.
  • Employees in California have much greater choice of health plans than workers nationwide. The survey found that 93% of workers in large firms (200 or more workers) in California were offered more than one health plan option in 2004, compared to 82% of workers in large firms nationally.
  • Almost half of all large firms (44%) reported that they were very likely to increase the amount employees pay for premiums in 2005.
  • Few employers viewed current cost containment strategies as highly effective with just 13 to 15% reporting disease management, higher employee cost sharing, or tighter managed care networks as “very effective.”
  • Thirteen percent of California firms reported that they vary the contribution for family coverage based on whether an employee’s family member has the option of obtaining coverage elsewhere.
  • About half of all covered workers faced some form of cost sharing for hospital admissions.
  • While nearly all active workers with insurance coverage had drug coverage in 2004, the use of tiered cost sharing, with higher copayments for brand-name drugs than generics, has grown rapidly with 81% of workers now in plans that use them. While average payments for drugs in each of the three tiers (generic, preferred, and nonpreferred) increased in 2004, the average copayment in California for a nonpreferred drug ($25.90) remained lower than the national average ($33).

About The Health Research and Educational Trust

The Health Research and Educational Trust is a private, not-for-profit organization involved in research, education, and demonstration programs addressing health management and policy issues. Founded in 1944, HRET collaborates with health care, government, academic, business, and community organizations across the United States to conduct research and disseminate findings that help shape the future of health care. Visit for more information.

Methodology and Sponsorship

The California Employer Health Benefits Survey is a joint product of the California HealthCare Foundation (CHCF) and Health Research and Educational Trust (HRET). The survey was designed and analyzed by researchers at HRET, and administered by National Research LLC (NR).

The Kaiser Family Foundation sponsored this survey of California employers from 2000 to 2003. It is based on a national employer survey conducted annually by HRET and the Kaiser Family Foundation. The U.S. results in this study are based on that survey, and are available at

The findings are based on a random sample of 790 interviews with employee benefit managers in private firms in California. NR conducted interviews from May to September 2004. As with prior years, the sample of firms was drawn from the Dun & Bradstreet list of private employers with three or more workers. The margin of error for responses among all employers is +/- 3.5%; for responses among employers with 3 to 199 workers is +/- 4.7%; and among employers with 200 or more workers is +/- 5.2%. Some exhibits do not sum to 100% due to rounding effects.

Contact Information:
Eric Antebi
Director of Communications

About the California Health Care Foundation

The California Health Care Foundation is dedicated to advancing meaningful, measurable improvements in the way the health care delivery system provides care to the people of California, particularly those with low incomes and those whose needs are not well served by the status quo. We work to ensure that people have access to the care they need, when they need it, at a price they can afford.