When Community Human Services Corp. learned last summer that its overall health insurance premium was increasing by 44 percent, the Oakland agency faced a tough choice.

It could either cut back on the social services it provides to a variety of groups -- children, low-income families, even people lacking health care -- or cut health benefits for about 65 employees who have insurance for themselves and their families through work.

The nonprofit agency didn't have money in the bank to cover the $150,000 premium increase, nor could it hope for a bailout from the governments that hire it to provide services. On the contrary, the state budget impasse made it unclear whether the status quo in funding could be maintained.

In the end, the agency decided that rather than reduce services, it had to make changes to dependent coverage in its health plan -- a decision that Executive Director Mike Printz frankly admits went against the core values of the 33-year-old organization.

"There's an underpinning philosophy in this organization to provide support for families, and health care is a huge component of making sure a family is strong and has what it needs," he said.

The painful choice is just one local example of a national trend in which employers struggling with rising health insurance premiums are either passing on more costs to workers or dropping coverage altogether.

Employer-sponsored benefits cover nearly three out of every five Americans, and most employers last year continued to offer them despite steep premium increases, according to the Kaiser Family Foundation. But workers generally are facing higher contributions for family coverage and they're also being asked to share more of the costs for medicines and hospital care, said Gary Claxton, vice president with the foundation.

The Census Bureau reported in October that the United States saw a second consecutive year of growth in 2002 in the number of people lacking health insurance. The trend was driven primarily by a decrease in the percentage of people covered by their employers, according to the Census Bureau.

"There's been a very significant erosion, in the past couple years, in the population of small and midsize companies that pay 100 percent for employees and dependents," said Cliff Shannon, president of SMC Business Councils, a small-business trade association in Churchill. "We had an employer call us up and say, 'We can either meet payroll, or pay our health insurance bill.'"

Many workers at Community Human Services either operate residential programs for people with mental illness or make visits to the homes of disabled people, helping them complete daily living tasks. Those jobs bring wages of only about $7 or $8 per hour, so the promise of health insurance is key to attracting workers.

The monthly premium for single-employee coverage in the agency's health plan is about $350, but adding a spouse and/or children adds hundreds of dollars. The agency decided in July that it would begin an overhaul of spousal coverage that's still in progress. It also asked employees who wanted coverage for their children to pick up the additional premium costs -- a move that effectively priced children out of the plan.

Printz arranged for counselors from the Consumer Health Coalition, a Downtown nonprofit group, to help workers enroll their kids in the Children's Health Insurance Program. CHIP is a government program that provides free or subsidized coverage to families, depending on their income.

All children who left the company's health plan have found coverage in CHIP or some other program, but some employees have had concerns.

Crystal Turner, 32, of Lincoln-Lemington, said that her three children qualified for Medical Assistance, a different government health insurance program. The coverage is better than nothing, Turner said, but she believes some medical workers treat Medical Assistance patients differently than those covered through private insurance.

"I can tell there's a difference in the quality of their health care," she said.

The agency went through a similar process to find alternatives for spouses but found the task much more daunting.

Some individual health insurance plans bar access to people based on their medical history. The equivalent to CHIP for adults -- a program called adultBasic -- is currently full and provides fewer benefits than the company's plan. In the future, newly hired employees at the agency who want spousal coverage will be asked to pick up monthly costs of about $625 for those benefits.

Community Human Services isn't the only employer to boost employee contributions' for dependent coverage, said Claxton, the Kaiser Foundation official.

The foundation's annual survey of employer-sponsored health benefits found that family coverage in 2000 cost $6,438, with employers picking up about 74 percent of the cost. That percentage was down slightly in 2003, but the average annual premium for family coverage had grown to $9,068.

So, while many companies have maintained their contribution to dependent coverage, it hasn't felt that way for employees, Claxton said. As suggested by the recent grocers' strike in California -- where workers have organized picket lines for months, in large part because of a dispute over health care costs -- the trend is hitting hardest among lower-wage workers, according to Claxton.

"For most people with pretty good jobs, this coverage will hang on for a while," he said. "But there could be more and more problems for people who make lower wages."

Aside from premium costs, employees are being asked to pay more by way of co-payments.

In a 2003 survey of 200 small-to-midsize employers in the Pittsburgh area, for example, SMC Business Councils found roughly one-third of businesses had increased co-payments for both office visits and prescriptions. About 40 percent of companies had increased employee contributions for their premiums.

Those trends, along with the general increase in people going without coverage, will eventually force some tough questions, predicted Shannon.

"Are we going to ration health care on the basis of cost and income, whether through a national single-payer program or some propping-up of existing system? Or, are we going to do something fundamentally different?" he asked, referring to changes that might boost efficiency. "The gravy train in the health care industry cannot go on."

Printz worked in accounting at the agency for about 10 years before becoming executive director, so he knew about the trends in health care costs before Community Human Services' problem arose this summer. But a 44 percent premium increase in one year was shocking, he said, as was the prospect of losing coverage for his own family. Printz's daughters are among those kids who moved to CHIP.

"To really face, 'Wait a minute, myself or someone in my family might not have health insurance?' It helped me take stock of how we really take health insurance for granted," Printz said.