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Report: Health Insurance Costs Rose Faster Than Income in All States From 2003 to 2011

Average family premiums increased by 62% (Dec. 12)

Average premiums for employer-sponsored family health insurance plans rose 62% between 2003 and 2011, from $9,249 to $15,022 per year, according to a new Commonwealth Fund report. The report, which tracks state trends in employer health insurance coverage, finds that health insurance costs rose far faster than incomes in all states. Workers are also paying more out-of-pocket as employee payments for their share of health insurance premiums rose by 74% on average and deductibles more than doubled, up 117% between 2003 and 2011.

The report also finds that total health insurance premiums now amount to 20% or more of annual median family incomes in 35 states, affecting 80% of the U.S. working-age population. States in the South and South-Central U.S. had the highest costs relative to household income — in West Virginia, New Mexico, South Carolina, and Texas, average total health insurance premiums amounted to more than 25% of median incomes.

“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 lead author Cathy Schoen. “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.”

In 2011, average annual premiums for family plans ranged from about $12,400 to $13,500 in the lowest-cost states (Arkansas, Alabama, Iowa, Tennessee, Idaho, Mississippi, Utah, and North Dakota) to more than $15,000 a year in 21 states. Premiums averaged from $16,000 to nearly $17,000 in Delaware, Alaska, Connecticut, Vermont, New York, the District of Columbia, New Hampshire, and Massachusetts, which have the highest average family premiums.

Premiums rose far faster than incomes across the country from 2003 to 2011. While average family premiums increased 62% during that time, median family income rose about 11%.The increase in premiums ranged from 42% in the lowest-growth state, Tennessee, to 76% in the highest-growth state, New York. Twenty-seven states had increases of 60% or more. 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 in 2003 to $3,962 in 2011 — a 74% increase.

In addition, deductibles more than doubled from 2003 to 2011, increasing an average of 117% per person during the 8 years the report studied. In 2011, 78% of workers faced deductibles, up from 52% in 2003. In 2011, average deductibles exceeded $1,000 in 35 states, compared with none in 2003. Deductibles have been rising for employees working for large as well as small firms. However, workers in small companies with fewer than 50 employees typically face higher deductibles than those working for larger firms. Deductibles in small firms were highest in North Carolina, Texas, and Vermont, exceeding $2,200 per person.

If historical trends continue, family premiums will reach $24,740 by 2020 — an increase of 65% from 2011, the report says. The analysis also shows that slowing the rate even modestly would make a significant difference for families and businesses. For example, reducing the annual growth rate by one percentage point would lead to $2,029 in savings for families by 2020.

The report’s authors note that the Affordable Care Act lays the groundwork for lowering cost growth and for improving and expanding insurance coverage. The law’s provisions put pressure on private insurance plans to lower their overhead and to focus on the underlying costs of health care, setting standards for how much of each premium dollar must go to healthcare as opposed to administrative costs, with insurers who don’t 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 needs to be done to confront the forces that are driving up the cost of care in private insurance markets.

Source: The Commonwealth Fund; December 12, 2012.

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