Health insurance premiums rising as a share of family budgets
by Tim Anderson ~ January 2012 ~ Stateline Midwest »
The cost of health insurance p
remiums continues to consume a rising share of household budgets, reaching more than 20 percent of median family incomes in 2010 in some Midwestern states.
Those findings by the Commonwealth Fund are part of a recent study that also examines how various provisions of the Affordable Care Act could curb the increases in health costs being experienced by businesses and workers.
In 2010, the average private employer premium for family coverage in the United States was $13,871, an increase of 50 percent from 2003.
Cathy Schoen, a co-author of the Commonwealth study, says this steep rise has cut into or negated the wage increases of many families. The long-term trend is also straining the budgets of employers.
Increases are occurring across the country, but there is considerable state-to-state variation in the cost of employer-based health insurance. In the Midwest, for example, the average cost of family health premiums in 2010 ranged from a low of $12,542 in South Dakota to a high of $14,703 in Illinois.
The Commonwealth study does not address these disparities, but Schoen points to several possible reasons: cost-of-living differences and variations in health care costs, the demographics of the working population, characteristics of the state industry base (small vs. large businesses, manufacturing vs. services), and the type of health plans being provided by employers (high or low deductibles and the level of benefits, for example).
Differences in health care systems and practices are another potential factor. For example, Schoen says, strong primary health care systems can help drive down costs.
Using data from the Medicare program, researchers for the Dartmouth Atlas of Health Care have documented other regional variations that impact health care usage and costs. In areas with more hospital beds per capita, more people are admitted for hospital stays. In areas with high numbers of specialist physicians, there tend to be higher rates of doctor visits and revisits. Regions vary, too, in how many prescriptions are being filled or diagnostic tests are being ordered.
One goal of the Affordable Care Act is to moderate cost growth by encouraging new payment and delivery systems — strengthening primary care, improving care coordination, and paying providers based on measurements of quality and health outcomes.
The Commonwealth Fund study points to other provisions that specifically target health premiums.
Beginning in August, insurers not spending a certain percentage of their premiums on medical care will have to offer rebates to enrollees. The process of federal and state rate review is also being strengthened.
In addition, Schoen says, the opening of health insurance exchanges in 2014 will give states the opportunity to work with insurers on new provider payment systems while also requiring carriers on the exchange to meet certain cost and quality standards.
Opponents of the Affordable Care Act, though, are predicting that it will result in higher costs for employer-based coverage. Douglas Holtz-Eakin, president of the American Action Forum, concludes in a March 2011 study that a new fee on health insurers as well as mandated changes in the insurance market will cause premiums to rise.