Premiums see 160% rise since 1999, far outpacing inflation
Medical care declined as prices soared rapidly
The rise in healthcare costs picked up this year even though the economy hasn’t, despite cost-control efforts by lawmakers, businesses and the healthcare industry, a survey of employers found.
The survey, released last week by the Kaiser Family Foundation and Health Research & Educational Trust, found premiums for health benefits provided by employers increased 8% for individuals and 9% for family coverage. That’s compared with annual premium growth of 3% to 5% since the recession began for individuals and families (See related editorial, p. 22).
Researchers also highlighted the rapid acceleration in premium growth compared with overall inflation since 1999. Family premiums increased 160% through this year, while inflation climbed 38%.
“I think it’s a really important indicator that we have not solved the cost problem in this country and that we simply cannot afford to sustain these kinds of increases,” said Sabrina Corlette, a research professor for the Georgetown University Health Policy Institute.
Higher prices were most likely behind the higher premiums as use of medical care declined amid a weak economy, she said. “This was quite a jump and one that I’m not sure that people expected given that utiliza- tion has been in a trough,” Corlette said. She pointed to recently published research that found significantly higher fees paid to U.S. physicians than doctors in Australia, Canada, France, Germany and the United Kingdom (Sept. 12, p. 6).
Providers should bear some responsibility for rising healthcare costs, and health plans should do more to examine costs and negotiate rates, rather than simply pass rising costs onto employers and households, Corlette said.
Nancy-Ann DeParle, assistant to the president and deputy chief of staff, wrote in a blog post that the rise in premiums could be attributed to erroneous projections for medical costs made by insurers last year and anticipation that insurers’ costs could climb under the Patient Protection and Affordable Care Act. She dismissed both projections as wrong and said insurers profited as a result of higher premiums and lower-than-expected costs.
In a statement, America’s Health Insurance Plans, an insurance trade group, rejected the sector’s profits as a reason for rising premiums and said costs have climbed under the Affordable Care Act.
Corlette said provisions of the Affordable Care Act that expanded coverage and benefits account for 1 to 2 percentage points of the premium growth, based on her review of state rate filings for individuals and small employers. She stressed that her review was not comprehensive.
The Kaiser and HRET survey, which included employers of all sizes, attributed 2 percentage points of the 9% increase in family premiums to Affordable Care Act provisions that prolonged coverage of adult dependents to age 26 and mandated preventive benefits. “Clearly, there has been an impact,” said Gary Claxton, a vice president for Kaiser and co-executive director of the Kaiser Initiative on Health Reform and Private Insurance, about the federal law.
The White House declined to comment on researchers’ estimates for added costs from the law. DeParle called the Kaiser report informative, “but it’s a look backwards,” she continued.
“When we look to the future, we know that the Affordable Care Act will help make insurance more affordable for families and businesses across the country,” DeParle wrote. She also pointed to recent projections for 2012 premiums indicating slower growth, including that federal employees will see an average increase of 3.8% next year compared with 7.3% this year, according to the Office of Personnel Management.
Andrew Webber, president and chief executive officer of the National Business Coalition on Health, also questioned the role prices played in 2011 premium increases as the tepid economic recovery squeezed household budgets and demand for medical care flagged. He described this year’s premium jump as unsurprising, but dramatic when compared with more moderate overall inflation growth.
Webber, whose Washington-based notfor-profit represents purchasing coalitions, said he believes market consolidation has fueled the premium increases, and cited 2010 research by the Center for Studying Health System Change that found insurers paid hospitals within and across eight markets widely different prices. Results suggested hospital market clout led to the variation, the report said. The American Hospital Association rejected the study as flawed.
Webber said employers must do more to design or demand more comprehensive health benefits that promote prevention and eliminate waste, including financial incentives for employees to use limited networks of providers with demonstrated quality and lower costs and automatic enrollment in disease management for the chronically ill.