Jeff Elliott, for HealthLeaders Media, December 6, 2010
Family health insurance premiums for employer-sponsored plans rose 41% between 2003 and 2009, according to a study by The Commonwealth Fund. At the current pace, average premiums across the country would reach more than $23,000 per family by 2020, as detailed in the report. The net effect, according to study authors, is and will continue to be a significant increase in the percentage that families pay in premiums relative to their household income. “This report details how health insurance has become increasingly unaffordable for families during the years before enactment of the Affordable Care Act,” said Commonwealth Fund President Karen Davis during a press conference.
To illustrate, the report noted that in only three states—New Mexico, Texas and West Virginia—were average premiums 18% or more than the median household income (under-65 population) in 2003. By 2009, that number had climbed to 26 states. Data was gathered from U.S. Census Current Population Survey and the 2003 and 2009 Medical Expenditure Panel Survey (MEPS)—Insurance Component, as reported by private and public sector employers state-by-state.
Family plan premiums varied widely across the country, with Arkansas having the lowest average in 2009 at $10,969 and Massachusetts with the highest average premiums at $14,723. The report did not estimate what percentage employees are paying of these premiums relative to their employers’ contributions, but lead author Cathy Schoen, Commonwealth Fund senior vice president, said the overall rise has had significant financial impacts on employers and families.
“The steady increase in the cost of health benefits has directly contributed to slower wage growth and pressure on jobs,” she said. “In effect, workers and their families with jobs with health insurance have been giving up wages to hold on to their health insurance. During the time period we looked at, median incomes rose far slower than premiums.”
Schoen noted that disparity in premiums across the country was generally due to the costs of healthcare in a particular region in addition to other economic factors such as cost-of-living. Western and southern states generally had the highest premiums relative to household income. “In states such as Alabama, Kentucky, Louisiana, Mississippi and New Mexico, total annual premiums are already the equivalent of 21% or more of middle incomes as of 2009,” she said.
The study also noted that large firms (more than 50 employees) saw a 43% increase in family premium prices between 2003 and 2009, compared to 29% for small firms. However, family plan deductibles for companies with less than 50 workers were significantly higher, averaging $2,662 compared with $1,610 for employees of large firms.
The authors’ conclusion is that the Affordable Care Act (ACA) is a necessary effort that will help lessen the financial burden on families responsible for a rising portion of premiums under an employer-based health plan. “The new law provides us with the opportunity to reverse these unsustainable increases and ensure that families in every state have access to affordable, comprehensive health insurance,” Davis said.
The study detailed cost savings that families could expect under ACA. With an estimated 1% slower growth rate in premiums, which the authors noted would likely occur with reform efforts dedicated to curbing excessive increases and slowing the growth of healthcare costs, average annual savings would total nearly $1,000 beginning in 2015 and $2,300 by 2020.
“The Act provides multiple provisions that together offer the potential for a healthier future and start to address underlying health cost trends,” Schoen said. “Reforms will provide premium assistance for modest income, middle income families as well as those with low wages to make sure insurance is affordable. New benefit standards will ensure that everyone with insurance will not be at risk for catastrophic medical bills as total out-of-pocket costs will be limited.”
The Commonwealth Fund, established in 1918 to “promote a high performing healthcare system” that provides better access to low-income individuals, is a staunch supporter of ACA.
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