Health insurance premiums for families covered through their employers rose an average of 9 percent in 2010 and the average price for a family policy now exceeds $15,000 per year according to a new report from the Kaiser Family Foundation.
The Kaiser Family Foundation/Health Research & Educational Trust 2011 Employer Health Benefits Survey collects information from small and large employers nationwide to provide a detailed picture of trends in health insurance costs and coverage. This year's survey, the 13th by KFF and HRET, showed a much greater increase in premium costs and that health insurance costs outstripped both the 2.1 percent increase in real wages and the 3.2 percent rate of inflation last year.
"The big premium increase in the context of a struggling recovery and a weak economy – that's what makes (the increases) especially painful," said Drew Altman, president and CEO of Kaiser Family Foundation, in a press briefing announcing this year's findings.
"The big increase in premiums comes after one of the longest periods of moderation in premiums – four years in a row of growth of 5 percent or less," said Altman. "We just don't know if this is a one time spike or the beginning of a period of higher increases."
One thing the survey doesn't reveal, based on how it is structured, is why there was such a spike in rates this year. Altman speculated that there were a number of factors that could have resulted in the spike, most notably that insurers may have anticipated a faster economic recovery in 2011 than has actually occurred which would have led to a corresponding spike in health services utilization.
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Since utilization has remained relatively low there exists the possibility that insurers may seek much lower premium increases for 2012.
"If I had to guess, I'd say next year's increase will be lower since because the recovery has slowed utilization has come back down and premiums are likely to come back more into line with what actual utilizations is," said Altman. "One of the things we can say about the premium increase this year is that it is not because of the Affordable Care Act. That stands to reason because most of the law will not be implemented until 2014."
America's Health Insurance Plans was quick to chime in with their take on the latest Kaiser/HRET findings.
"This report is just the latest warning that far more needs to be done to address the rising cost of healthcare. Policymakers in Washington and the states need to focus on all of the factors that are driving premium increases: soaring prices for medical services, changes in the covered population that has resulted in an older and sicker risk pool, and new benefit and coverage mandates that add to the cost of insurance," said Karen Ignagni, president and CEO of AHIP. "Reducing healthcare cost growth will make it easier for consumers and employers to afford coverage, ease the burden on federal and state budgets, and put our vital safety net programs on sustainable and fiscally responsible paths."
Gary Claxton, vice president and director of Kaiser Family Foundation's Health Care Marketplace Project noted that the rising healthcare costs are indeed a factor that leads to higher insurance premiums as AHIP contends. Claxton added, however, that "in our system insurers are supposed to be the intermediaries between providers and consumers to try to address rising healthcare costs and it's not exactly clear how well they are performing that task at the present time."
In some circles, the news of the steep rise in rates was an irresistable opportunity to score political points.
"As American families struggle to make ends meet, they are being shackled with skyrocketing health care premiums which have risen faster than incomes. In fact, the new health care law has done nothing to control costs," said Sen. Michael B. Enzi (R-WY) and ranking member of the Senate Committee on Health, Edication, Labor and Pensions. "We can all recall when President Obama promised his health care law would decrease premiums for American families by $2500. Instead, because of the reams of requirements, red tape, and regulations resulting from the President's health care law, premiums are surging 9 percent this year. Next year will probably be even worse."
But the contention that insurance rates jumped significantly last year due to health reform may not hold water.
In a blog post on the Commonwealth Fund website, Jon Gabel, senior fellow at the National Opinion Research Center; Roland McDevitt, director, Health Research, Towers Watson; and Ryan Lore, senior associate, Towers Watson contend the law had only a minimal affect on insurance rates.
"While such spikes are not out of step with premium trends over the last decade, some are attributing the latest increase to the cost of the 2010 insurance reforms included in the Affordable Care Act, along with the "usual suspects" like technology, overall inflation, and an aging population," they write. "But a new analysis we've conducted attributes only 1.8 percentage points of the 8 percent to 9 percent rise in premiums to the insurance reforms."
Further, they see the increase as both justifiable and indicative of the broader coverage required by health plans under the Affordable Care Act.
"This marginal increase as a result of the reforms also means that families have better coverage that protects them from catastrophic health care costs as well as lower out-of-pocket costs for preventive services like colonoscopies and mammograms. It's logical that improvements in the quality of the product would increase the cost of premiums and lower out-of-pocket costs to some degree," they added
Regardless of the reasons for the increase, no one is contending premiums didn't rise significantly. When viewed over the course of a decade the continued rise in insurance prices paints a grim picture for working families.
Since 2001, family premiums have increased from an average of $7,061 to $15,073 last year – a 113 percent total premium increase over that period. By comparison, average workers' wages have increased by 34 percent and inflation has increased by 27 percent.
With the rise in premiums, workers are also now shouldering a greater burden of paying for those same benefits. The average employee contribution for health benefits increased from $1,787 ten years ago to $4,129 or an increase of 138 percent.