Rise in Health Insurance Costs Outpacing Income Growth, Report Finds

Rise in Health Insurance Costs Outpacing Income Growth, Report Finds

Wednesday, December 12, 2012  California Healthline

Growth in employees' health insurance premium costs outpaced growth in income in all 50 states from 2003 to 2011, while deductibles nearlydoubled during that period, according to a new report released by the Commonwealth Fund, Modern Healthcare reports.

The report, which aimed to better understand the financial strain on households and business budgets from the nation's rising health care costs, found that:

• A worker spent an average of $3,962 on premiums for employer-based family health coverage in 2011, an increase of 74% from 2003;
• The average premium for a family plan in 2011 was $15,022, up 62% from 2003;
• Seventy-eight percent of insured workers had deductibles in 2011, compared with 52% in 2003;
• The average deductible for an individual health plan in 2011 was $1,123, an increase of 117% from 2003; and
• The average deductible for a family plan in 2011 was $2,220, an increase of 106% from 2003 (Evans, Modern Healthcare, 12/12).
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Premiums increased three times faster than incomes for workers in New Mexico, South Carolina and West Virginia, where the premiums exceeded 25% of median wages, the report found.

The report warns that average family premium rates could reach $25,000 by 2020 if premiums continue to climb at the current rate.

ACA Provisions' Effect on Costs

Cathy Schoen -- senior vice president for policy, research and evaluation at the Commonwealth Fund, and an author of the report -- credited mechanisms in the ACA that have "begun to lay the groundwork to address costs and provide a platform for further action."

The report cited the law's medical-loss ratio regulations, the Medicaid expansion, the creation of health insurance exchanges, rules prohibiting insurers from denying coverage to individuals with pre-existing conditions and new payment incentives as examples of changes that could help lower premiums.

However, Robert Zirkelbach -- a spokesperson for America's Health Insurance Plans -- said that new taxes on insurers and minimum coverage requirements outlined in the ACA could drive up premiums. He added that the MLR provision is forcing insurers to scale back on non-medical coverage-related programs, such as accountable care organizations or health information technology investments.

Schoen acknowledged that efforts to contain health care costs will require action beyond the provisions in the ACA. "We need to take a marketwide approach that examines and focuses on the prices that being charge for care," she said (McGlade, CQ HealthBeat, 12/12).