State Trends in Premiums and Deductibles, 2003-2010: The Need for Action to Address Rising Costs

1. State Trends in Premiums and Deductibles, 2003-2010: The Need for Action to Address Rising Costs Cathy Schoen Senior Vice President The Commonwealth Fund Presenting on behalf of the author team www.commonwealthfund.org cs@cmwf.org November 16, 2011

2. 2 Summary of Main Findings • Private Employer Premiums have been going up far faster than incomes in all states • Employee direct payments for their share of premiums has risen even faster • Working Families are paying more for less protection • Deductibles have doubled, in large as well as small firms. • Highest in small firms • If historic trends before the Affordable Care Act continue annual premiums would average $24,000 by 2020 • Affordable Act provisions have the potential to reduce the rate of growth while improving coverage protection • Realizing the potential will require joint action, spreading reforms and a focus on private – not just public costs

3. 3 Health Insurance Premiums for Family Coverage, by State, 2010 Dollars State average = $13,871 Premiums Increased by 50 Percent on Average from 2003 to 2010 Source: 2010 Medical Expenditure Panel Survey–Insurance Component.

4. 4 Employer Premiums as Percentage of Median Household Income for Under-65 Population, 2003 and 2010 62 percent of under-65 population live where premiums are 20 percent or more of income by 2010 2003 2010 WA WA NH NH MT MT ME ND ME ND VT VT OR MN OR MN MA MA ID ID WI WI SD SD NY NY WY MI WY MI RI RI IA IA PA PA CT CT NE NE NJ NJ NV NV OH OH IN IN IL IL DE UT DE UT CO CA CO WV CA WV MD MD KS VA MO KS VA MO DC KY DC KY NC NC TN TN OK AZ OK AZ AR SC AR SC NM NM GA GA AL MS AL MS TX TX LA LA FL FL AK AK Less than 14% HI HI 14%–16.9% 17%–19.9% Median Rate: 19.5% Median Rate: 14.9% 20% or more Sources: 2003 and 2010 Medical Expenditure Panel Survey–Insurance Component (for total average premiums for employer-based health insurance plans, weighted by single and family household distribution); 2003–04 and 2009–10 Current Population Surveys (for median household incomes for under-65 population).

5. 5 Employee Average Annual Contribution for Family Coverage Premium Increased 63% from 2003 to 2020 Dollars per year for family coverage paid by employees Source: Medical Expenditure Panel Survey–Insurance Component (employee premium share for 2003 and 2010).

6. 6 Private Health Insurance Deductibles: State Averages by Firm Size and Household Type, 2003–2010 Note: Small firms = firms with less than 50 employees; large firms = firms with 50 or more employees. Source: Medical Expenditure Panel Survey–Insurance Component, 2003 and 2010.

7. 7 Total Premiums for Family Coverage, 2003, 2010, 2015, and 2020 if Historic Trends Continue Health insurance premiums for family coverage (dollars) * Premium estimates for 2015 and 2020 using 2003–10 historical average national growth rate. Source: Medical Expenditure Panel Survey–Insurance Component (premiums for 2003 and 2010).

8. 8 Affordable Care Act Potential for New Directions • Near universal coverage and affordable plan choices for individuals and small businesses in state exchanges • Medicaid expansion and premium tax credits for private health plans for families earning up to $89,400 • Essential health benefit standard with cost-sharing limits • Reduce costs and slow the rate of cost growth • State/federal rate review for increases of 10% or more now in effect; new rules for medical claims as a share of premiums with rebates to consumers in Aug. 2012 • Market reforms and exchanges to reduce administrative costs, create broad risk pools, achieve scale economies • Payment and system reforms to slow cost growth and improve access, quality and safety • Potential to reduce annual rate of increase by 1% or more if reforms creatively applied and spread to private insurance

9. 9 Projected Annual Savings in Family Premiums, 2015 and 2020 Source: Medical Expenditure Panel Survey–Insurance Component; Premium estimates for 2015 and 2020 using 2003–10 historical average national growth rate.

10. 10 Premium Tax Credits and Cost-Sharing ProtectionsUnder the Affordable Care Act Catastrophic policy with essential benefits package available to young adults and people who cannot find plan premium <=8% of income Note: Actuarial values are average percent of medical costs covered by a health plan. Premium and cost-sharing credits are for silver plan. Source: Federal poverty levels are for 2011; Commonwealth Fund Health Reform Resource Center: What’s in the Affordable Care Act? (PL 111-148 and 111-152), http://www.commonwealthfund.org/Health-Reform/Health-Reform-Resource.aspx.

11. 11 Looking Forward: Building on Affordable Care Act • Past two decades trends spell higher premiums and worse coverage • Premiums up and buying less protective benefits • Squeeze on businesses and families across the country • Health and Economic security at risk if private insurance trends continue • Uninsured and under-insured • Sacrificing wage and job growth to maintain benefits • Affordable Care Act Potential for New Directions • Near universal coverage • Premium oversight; rebates in 2012 • Better coverage and premium assistance: 2014 • Slowing the rate of cost growth will require spread of payment reforms and focus on total health system