Insurance Premium Trends

It is widespread knowledge, especially for anyone who has to pay for a significant part of their health insurance, that premiums have risen rapidly, along with other forms of cost-sharing, such as deductibles, copays and coinsurance.  A report from the Commonwealth Fund examines the state-by-state trends in premiums and deductibles.   (Commonwealth Report)   Over the seven years from 2003 to 2010, family coverage premiums rose by 50% across all states, and the employee share by 63%.  On top of that, per person deductibles doubled.  Rising health insurance costs take money that employers could otherwise use for expansion and new hiring and that individuals could use for other needs, including food, shelter and clothing.

Average family premiums were $13,871 in 2010.  Sixteen states had average premiums over $14,000 and two states and DC over $15,000 annually.  The lowest state, Idaho, was around $11,400 a year.  The lowest growth over the period was 33% in Idaho and highest was over 70% in Mississippi.  In California, New York, and Oregon, premiums are over 20% of median household income.  Since household income is not rising much if at all, health costs continue to eat up more and more of a family’s disposal income.  In 2010, 74% of workers had a deductible, compared with only 52% in 2003.  Not only is the presence of deductibles rising, but so is the deductible amount.  The same is true for many copays, and coinsurance is becoming more common.

One aspect of the report that is fairly unbelievable is its promotion of the idea that health reform is going to reduce insurance premiums or deductibles and other forms of cost-sharing.  So far, most cogent analyses suggest that the law has added to premiums through its coverage mandates and administrative burdens.  It has done nothing, and won’t likely do anything, to reduce provider price growth, the major cause of cost and premium increases.  The MLR limits will provide an illusory, one-time slowdown, but also do nothing to address actual health care spending.  In fact, they provide an incentive to see premiums rise rapidly, which allows the 15% reserved for non-health care spending on the group side, or the 20% on the individual side, to get bigger in absolute dollar terms.  Until provider pricing power is addressed, don’t expect premiums or cost-sharing to truly decelerate.