Over the past decade, workers' share of family health insurance premiums has gone from under $1,800 to over $4,100 a year, up 131% since 2001. Employers now contribute an average $15,000, up 113%.
That increase has been sneaking steadily upward each year. But last year saw an 8% increase in individual plan premiums and a 9% increase for family plans, according to the Kaiser Family Foundation. Many pundits were quick to round up the usual suspect: Health Care Reform.
3 of these changes affect insurers' costs, according to an analysis by Jon Gabel of the University of Chicago and colleagues at the Towers Watson consulting firm:
1. At age 19, kids used to get booted from family plans. Now they can stay on a parent's employer-supported plan until they're 26.
2. The vast majority of job-based plans now must pay the full cost of preventive health care. That means no co-pay to offset insurer costs.
3. Insurers can no longer set an upper limit on lifetime benefits.
Health Care Reform and Health Insurance Cost
Gabel and colleagues calculate that:
a) Keeping adult kids on parent plans added 0.9% to insurance premiums.
b) The ban on lifetime maximum benefits added 0.5% to insurance premiums.
c) Free preventive services added 0.4% to insurance premiums.
d) Other provisions of the Affordable Care Act had no effect on insurance premiums for 2011.
That means that health care reforms are responsible for 2 points of the 9-point increase in family health insurance premiums.
Why Health Insurance Premiums Went Up
So if it wasn't health care reform, what did cause the spike in health insurance premiums?
The AHIP and other experts agree: The price of health care is going up faster than inflation, and much faster than wage growth. According to a Standard & Poor analysis, health care costs covered by commercial insurers went up 7.73% in the year ending July 2011. "The big issue is that health care costs continue to climb faster than the rest of the economy," Collins says.
Levitt notes that insurers have to predict in advance what their costs will be. In 2011, he says, they guessed wrong. "This year many insurers guessed costs would go up faster than they actually have," he says. "The big factor is the economic downturn. Families are struggling financially, and cutting back on health care. Insurers and many of us thought the downturn was ending, and that people would seek health care they had put off."
The AHIP points out another factor. In harsh economic times, healthy people gamble that they will stay that way and don't buy health insurance. That means people who are insured, as a group, are less healthy and need more health care.