Increase of Health Insurance Premiums

Photo: Dollars and stethoscope

From 2003 to 2011, health insurance premiums
in the United States rose fast than incomes;
© Wodicka

The report, named “State Trends in Premiums and Deductibles, 2003-2011: Eroding Protection and Rising Costs Underscore Need for Action”, finds that total health insurance premiums now amount to 20 percent or more of annual median family incomes in 35 states, affecting 80 percent of the working-age population in the United States.

"Wherever you live in the United States, health insurance is expensive, and for many middle- as well as low-income families it is becoming ever less affordable," said Cathy Schoen, lead author of the report. "Workers are paying more for less financial protection when they get sick. The steady increase in health care costs over the past decade underscores the urgent need to build on the groundwork laid by the Affordable Care Act to slow the growth in private insurance costs." Premiums rose far faster than incomes across the country from 2003 to 2011. While average family premiums jumped 62 percent during that time, median family income rose just about 11 percent.

The report finds that deductibles and employees' premium shares grew, leaving employees with more out-of-pocket expenses and less protective health insurance benefits. The average annual amount an employee paid toward a family health insurance plan rose from 2,283 dollars in 2003 to 3,962 dollars in 2011 — a 74 percent increase.

Deductibles more than doubled from 2003 to 2011, increasing an average of 117 percent per person during the eight years the report studied. In 2011, 78 percent of workers faced deductibles, up from 52 percent in 2003. In 2011 average deductibles exceeded 1,000 dollars in 35 states, compared to none in 2003. Deductibles have been rising for employees working for large as well as small firms. However, workers in small firms with fewer than 50 employees typically face higher deductibles than those working for larger firms.

The report's authors note that the Affordable Care Act lays the groundwork for lowering cost growth and improving and expanding insurance coverage. The law's provisions put pressure on private insurance plans to lower their overhead and focus on the underlying costs of health care, setting standards for how much of each premium dollar must go to health care, as opposed to administrative costs, with insurers who do not meet the new standard paying rebates to policyholders. Other reforms provide private insurers with a platform for further cost-reduction efforts. The authors conclude, however, that more will need to be done to confront the forces driving up the cost of care in private insurance markets.

"The Affordable Care Act has put the United States on a path toward a high performing health care system, where everyone has access to high-quality, affordable, and secure health care," said Karen Davis. "As we implement the law's reforms, it will be crucial to stabilize cost growth by holding care systems and private insurers accountable for better outcomes and lower costs."; Source: Commonwealth Fund