Health costs swamping U.S. economy

But individuals aren’t the only ones struggling with the crushing burden of health care costs.

At the Trolley Car Diner in Philadelphia, the high cost of health insurance has put the workers and their boss in a painful predicament, according to owner Ken Weinstein.

“When we first got into business 10 years ago, we were able to offer all our hourly employees a reasonable health insurance plan that costs $60 a month,” he said. “We can no longer do that.”

Today, that low-cost plan no longer exists. Now, insuring the same employees costs over $350 a month. Weinstein can’t afford it, so most of his 55 employees go without.

“It's terrible,” he said. “It's hard to watch people have to leave their health care insurance and try to make do without having it.”

In 2001, the average annual premiums for employer-sponsored family coverage came to $7,053. Two years later, that cost had risen to $9,068. This year, it’s projected to hit $12,485, according to the National Coalition on Health Care. 

Those surging premiums for health care insurance bleed profits from businesses large and small.

“This is at the top of every CEO's ... every business owner's short list of biggest challenges facing their companies.” said Kate Sullivan-Hare, executive director of health-care policy for the U.S. Chamber of Commerce.

Take General Motors. The world's largest automaker supports the health care needs of 170,000 active workers and 430,000 retirees — more people than are in the U.S. Army. GM's future obligations for health care costs are over $69 billion. It spends $5 billion a year on health.

“At the end of 2004, we spent $1,525 per vehicle for health care alone,” said Woody Williams, GM’s health care director.

Rapidly rising health care costs reduce competitiveness vs. foreign companies and force businesses to cut back on new hiring, wage increases and capital investment. It’s a feedback effect dragging down the overall economy.

“It is absolutely unsustainable that health care continues to rise anywhere from 11 to 15 percent,” said Williams.

A recent study by Boston University's School of Public Health indicates health care costs gobble up nearly one-quarter of the growth in the economy. 

“None of the things we are doing now are going to rein in health care cost increases,” said Dr. Alan Sager, one of the study’s co-authors. “Unless we do something different, health care is going to take a bigger and bigger share of the U.S. economy every year — even though more and more people are losing health insurance coverage.”

But at the Trolley Car Diner, Ken Weinstein says he and his workers need help — now.

“The federal government is going to have to ante up and put more money into health insurance,” he said. “And they're going to have to somehow regulate the insurance companies so there is health cost control. There is no other way of doing it.”

That’s one businessman's solution to the problem. But there are a number of other ideas being proposed by the White House, the Congress and corporate America.

MORE FROM CNBC TV

CNBC TV Section Front

CNBC: Coke looking for the next real thing CNBC: GE in talks to spin off NBC Universal Battle over wages brews at Wal-Mart CNBC report: Ultimate Fighting CNBC Special Report: As Seen On TV Special Report: Cruise Inc. Buffett: The economy has ‘fallen off a cliff’ CNBC on the new black overclass Housing boom was a house of cards Marijuana growers thrive in California CNBC TV Section Front   Add CNBC TV headlines to your news reader: