Benefits August 21, 2009

Report Shows Potential Cost Savings from Health Care Reform

August 21, 2009 (PLANSPONSOR.com) - A new report finds that national reforms that slow health care cost increases by 1% to 1.5% per year would yield what the Commonwealth Fund calls "substantial" savings for families and businesses.
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The report, Paying the Price: How Health Insurance Premiums Are Eating Up Middle Class Incomes, State Health Insurance Premium Trends And The Potential Of National Reforms , indicates that by 2020, slowing the annual rate of growth by 1% would yield more than $2,500 in reduced premiums for family coverage, and slowing growth by 1.5 % would yield more than $3,700 in premium savings compared to projected trends. According to a press release, the report says that nationally, family premiums for employer-sponsored health insurance increased 119% between 1999 and 2008, and could increase another 94% to an average $23,842 per family by 2020 if cost growth continues on its current course.

The report’s state-by-state analysis shows the five-year increase (2003 to 2008) in employer-based premiums for family coverage averaged 33%, ranging from a high of 45% in Indiana and North Carolina to an average low of 25% in Michigan, Texas, and Ohio. Most states saw increases of 30% to 40%.

The report found that insurance premiums have been rising much faster than income across states, and as a result, by 2008 total premiums – including employee and employer shares – equaled or exceeded 18% of the average household income for the working age population in 18 states, compared to just three states in 2003. In three states – Mississippi, Tennessee and West Virginia – family premiums averaged 20% or more of middle household incomes for the state’s under-65 population.

The report authors conclude that if current trends continue, middle and lower income families could end up priced out of the health insurance market, the press release said. They point out that estimates indicate that payment and system reforms, including the choice of a public insurance plan to compete with private plans, could reduce projected spending by $2 trillion to $3 trillion between 2010 and 2020 — a reduction of 1% to 1.5% in annual growth rates.

More information from the report can be downloaded from here .

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