Private Health Insurance Premiums Rise 9% - Top $15,000 Per Year for Family Coverage

If Private Health Insurance Is Supposed to Control Costs – Why Hasn’t It

A key element of the Republican plan for ending Medicare and replacing it with subsidized private health insurance is that by using the private sector plans the costs of medical care will not increase nearly as fast as they have.  This position was dealt a serious blow by the release of a Kaiser Foundation study that found private insurance costs rose 9% in the past year.

The information from the study is summed up as this.

The 9% average increase, reported in an annual poll of employers performed by the Kaiser Family Foundation and the Health Research and Educational Trust, comes despite a continued trend toward more limited use of medical services in the U.S. Last year, family premiums rose just 3%, the survey found.

Many families have not seen this level of increase in their own contribution to health care costs, as employers have absorbed a large portion of the increase.

Employers' average annual family premium for 2011 was $15,073, up from $13,770 last year. For a single worker, the figure was $5,429, up 8% from $5,049 in 2010. The increase in employees' average premium contribution for a family plan was far less: 3% to $4,129, according to the survey.

But before employees take too much comfort from that number, the trend where employee contributions rise far less than the total cost of health insurance is rising cannot continue.  At some point, probably very soon employers will raise the contribution from employees, or stop offering coverage altogether.

There are a number of conclusions that can be drawn from this data, and here are a few.

1. The idea that private insurance companies, with their incentives to keep medical care costs down can actually do that is just not true.  Insurance companies are in the middle and have very little leverage over a system where costs increase under a pay-for-procedure system.

2. The pay-for-procedure system simply cannot continue.  That system produces incentives for health care providers to increase costs not decrease them.  Such a system will ultimately produce a financial crisis in health care in the United States.

3. The increase in medical care costs will produce even more pressure for government to shift health care costs to individuals and away from government.  This is the core of the Republican health care plan, and if enacted the burden on individuals will increase substantially.  From the New York Times is this



Eric Michael Johnson for The New York Times

Allan Evans at his home in Flushing, Queens.

Last year, his insurance company tried to raise his rates

while he was undergoing chemotherapy for lymphoma.



The higher premiums are particularly unwelcome at a time when the economy is sputtering and unemployment is hovering at about 9 percent. Many businesses cite the cost of coverage as a factor in their decision not to hire, and health insurance has become increasingly unaffordable for more Americans. The cost of family coverage has about doubled since 2001, compared with a 34 percent gain in wages.

            The Times article also illustrated its point with this summary of an individual

Allan Evans, a musicologist who was undergoing chemotherapy for lymphoma last year, was notified that his Emblem Health premium would increase 270 percent, to $2,293 a month for his family’s $5,000-deductible policy, provided through his wife’s business, a small Italian language school in Greenwich Village. Emblem had eliminated his family’s category and offered a more expensive plan. That kind of increase is not reviewable by the state.

4. Employers, like insurance companies, are in the middle of the problem.  Employers are facing increased costs for their portion of health insurance while also facing employees whose real income is not rising and who are less and less able to afford taking on increased health insurance costs themselves.

The hope is that this one year result is an anomaly and that in the future health care costs will not be rising as fast.  Hope, unsupported by facts and historical results though is not the best basis for policy.