Employer Health Insurance Costs Increased 62 Percent Since 2003
    By News Staff | December 12th 2012 11:41 AM | 7 comments | Print | E-mail | Track Comments

    The average premiums paid by employer-sponsored family health insurance plans rose  from $9,249 to $15,022 per year between 2003 and 2011 - a 62 percent increase, according to a new Commonwealth Fund report. The new report by the advocacy group tracks state trends in employer health insurance coverage and shows that health insurance costs rose faster than incomes in all states. 

    Workers are also paying more out-of-pocket costs; as employer costs rose, employee payments for their share of health insurance premiums also rose, by 74 percent on average, and deductibles more than doubled, up 117 percent between 2003 and 2011, they say.

    The report 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 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 percent of median incomes.

    They wrote the report to show that the Affordable Care Act lays the groundwork for lowering cost growth and improving and expanding insurance coverage. The law's intent is to 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 instead of administrative costs. Other reforms provide private insurers with a platform for further cost-reduction efforts. 

    "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 Commonwealth Fund president 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."

    "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 Commonwealth Fund senior vice president 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."

    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.

    Paying More for Less

    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 increase in premiums ranged from 42 percent in the lowest-growth state, Tennessee, to 76 percent in the highest-growth state, New York. Twenty-seven states had increases of 60 percent 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 percent increase. Looking state-by-state, employee contributions ranged from about $3,300 in Indiana, Hawaii, West Virginia, Ohio, and Wisconsin, to more than $4,600 in Arizona, South Carolina, New Mexico, Colorado, and Mississippi.

    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 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. 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 percent from 2011. 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. Slowing annual cost growth by 1.5 percent would yield savings of $2,986 per family.

    Report: "State Trends in Premiums and Deductibles, 2003-2011: Eroding Protection and Rising Costs Underscore Need for Action" - Commonwealth Fund


    Gerhard Adam
    So, in other words, employers experienced the lowest increase in costs of the total rise in prices for health care.
    Mundus vult decipi
    Only in percentage.  If an employer was paying $10,000 in annual cost and it went up 63% that is much different than an employee who was paying $1,000 going up 75%.

    Generally, the entire thing is a scam and we seem to have created a class warfare solution rather than a good one. Like most of government policy, 'benefits' are a relic of World War II and its restrictions on wage controls and since the costs are hidden to most employees, they think they are paying too much. 

    Everyone who thinks about this knows multi-state selling and making health care a tax write-off for everyone would solve this problem.  If we actually enabled tort reform America would still have the best health care in the world, and it would also be as cost-effective as our technology industry.
    Gerhard Adam
    If an employer was paying $10,000 in annual cost and it went up 63% that is much different than an employee who was paying $1,000 going up 75%.
    Not at all, except in terms of total dollars.  However the total dollars available is also vastly different, and the employer does get it as 100% tax write-off whereas the employee doesn't.
    Mundus vult decipi
    That's what I said, it is wrong that I can't write off my health insurance but if I run it through my company I can.  Class warfare on the health insurance industry is the kind of stupid solution we got to no one's surprise, when the obvious solution is tort reform and allowing competition and undoing this World War II-era silliness about benefits.
    Gerhard Adam
    While tort reform can keep down costs, how does this help patients?  A doctor can make a multi-million dollar mistake and be responsible for pennies on the dollar [which insurance can then deny coverage on]?  Also, what competition?  Between insurance companies, that will still ultimately be the arbiters about which benefits are covered, all the while protecting health-care workers from the effects of the marketplace?
    Mundus vult decipi
    It helps patients because malpractice is the second leading external cost but tort reform would solve the biggest external cost - defensive medicine.  You are arguing against the government PR campaign by claiming lower costs for non-medical issues won't help people.

    Denying coverage is a strawman.  If you are claiming government will not deny and decide coverage, you are just on a vendetta against corporations and idealizing an alternative. The Liverpool death pathway in the UK is just that.
    Gerhard Adam
     If you are claiming government will not deny and decide coverage, you are just on a vendetta against corporations and idealizing an alternative.
    Not denying it, but acknowledging this as something that will occur regardless.   The point being that when people talk about "death panels", they are being disingenuous by accusing government of doing something that insurance already does.
    It helps patients because malpractice is the second leading external cost but tort reform would solve the biggest external cost - defensive medicine.
    That term [defensive medicine] gets tossed around alot, but what is it supposed to mean?  Show me any profession that doesn't perform its services "defensively", and I'll show you an industry that gets sued alot.  Everyone that has the potential to be sued, must perform their jobs with due diligence and be insured against damages or losses that they cause to others.

    If doctors are being disproportionately sued, then the problem is with the legal profession and not insurance, since clearly there are enough judges that must deem these cases to have merit.  As I said, tort reform will reduce costs, unless you happen to be one of the patients that has been harmed by the malpractice.  Everyone will have limited liability, while you still actually have to pay the care bills without limit.  That is not a strawman, that is precisely what the basis for litigation is; to provide recompense for real damages.  If that is limited so that recovered costs are less than those that are incurred, it is help for people's insurance costs at the expense of those that have been harmed.

    BTW, let's also consider that the problem of malpractice insurance is a self-inflicted problem, because of hospitals and insurers desire to settle rather than go to court.  
    Mundus vult decipi