According to a new report released on November 17, employer-sponsored health insurance premiums have risen faster than income in every state. An analysis of federal data was conducted by the Commonwealth Fund, an independent research organization; it shed new light on the state-by-state picture while essentially confirming a national trend of greater premiums and decreased benefits.
The District of Columbia had the highest annual total premiums, including both the employer’s and the worker’s share. From 2003 to 2010, they rose to an average of $5,644 for a single policy (51% rise) and $15,206 for a family version (41% rise). Furthermore, the costs were significant even in states with some of the lowest average rates, such as Alabama, where a single policy averaged $4,571 in total premiums and a family version reached $12,409.
California was roughly in the middle of the pack; from 2003 to 2010, they rose to an average of $4,811 for a single policy (46% rise) and $13,891 for a family version (52% rise). Study co-author Cathy Schoen noted, “Although employees typically don’t see the total cost of their insurance, the sharp increase, in effect, means lower wages and salaries as employers make the trade-off between increasing wages and offering insurance.
There was also little correlation between a state’s average premiums and its cost of living. States such as New Mexico and West Virginia, where incomes are lower than average, had some of the highest premiums in the nation. According to Schoen, the variation was due to a range of factors, including how generous employers’ plans were in any given state. “Premiums are lower if deductibles tend to be higher,” she noted. Therefore, states such as Montana, where the average family deductible was $2,295, lower total premiums mask high out-of-pocket costs.
By contrast, the District had among the lowest average deductibles. Increasing deductibles is only one way employers are attempting to shift healthcare costs onto their workers. Another method is to require employees to pay a larger share of the premium. Workers in Virginia were among those who made the highest contributions; they paid $1,114 for an individual plan and $4,477 for a family plan. That marked a 76% increase since 2003 for individuals, and a 64% increase for families.
In every state, total premiums now comprise a significant portion of typical incomes. In 2003, 13 states had annual premiums that accounted for less than 14% of the median income. In 2010, there were none. Furthermore, 62% of Americans now live in a state in which health insurance premiums equal 20% or more of median earnings for adults younger than 65.
Schoen cited an earlier Commonwealth Fund study, which predicted that the new healthcare law could help curb future premium increases through measures that encourage providers to give less expensive care, subject insurers to greater scrutiny, and foster more competition. Other healthcare analysts counter that the new healthcare law might result in a decreased number of providers serving more patients. They also cite increased costs adding to our already huge budget deficit.