Consumer Federation of California

A national report released this week detailing significant increases in health insurance premiums over the past seven years will provide fodder for a recently launched campaign in California to let voters decide whether the state should have the authority to reject health insurance rate increases.

Employer spending on workers’ health insurance increased by 50% nationwide from 2003 to 2010, while the amount employees paid toward their insurance increased by 63%, according to a state-by-state report released this week by the Commonwealth Fund.

The report shows that health insurance costs rose faster than income in every state in the years before passage of the Affordable Care Act. And these increasingly expensive premiums are buying less-protective coverage, researchers said, pointing to deductibles doubling over the same time period.

California, which began the seven-year period in the lower half of the scale in premium costs, now is in the top tier, where health insurance premiums represent at least 20% of a worker’s earnings, according to Commonwealth Fund researchers.

"This is exhibit A for why we need a ballot measure to force insurers to justify rate increases," said Jamie Court, president of Consumer Watchdog, the Santa Monica-based organization that filed papers last week to get such a measure on the November ballot.

"When employers see a jump of 50% in their costs and employees see a 63% increase in their share, those are catastrophic hits to the wallet," Court said. "It sounds like this report backs up what our opinion research shows — that people are feeling this in their pockets."

Patrick Johnston, president and CEO of the California Association of Health Plans, said premium increases are a symptom — not the cause — of the rising cost of health care.

"Health insurance premiums are a direct reflection of the cost of medical care, and so as the cost of care continually rises, premiums rise in turn," Johnston said.

"We’ve been battling the perfect storm of paying for health care — prices of medical treatment are going up, government payments to doctors and hospitals that treat Medi-Cal patients are grossly inadequate and there are record high numbers of uninsured. All of these translate into direct cost increases for private insurers and their customers," Johnston said. Medi-Cal is California’s Medicaid program.

Both Court and Johnston commented before seeing the Commonwealth Fund report, which was not released to the public until Thursday.

Dark, Sobering Image of Coverage Costs

Researchers used two yardsticks to measure health insurance costs in the Commonwealth Fund survey: the percentage of a worker’s overall earnings devoted to health coverage and workers’ out-of-pocket expenses. Both rose in every state during the seven years of the study.

"Whether you live in California, Montana or West Virginia, health insurance is expensive. Out-of-pocket costs for premiums and care are consuming a larger share of people’s incomes at a time when incomes are down in a majority of states," Cathy Schoen, Commonwealth Fund senior vice president and lead report author, said in a release.

"Workers are paying more for less financial protection. The steady rise in costs from 2003 through 2010, before enactment of the Affordable Care Act, points to the urgent need for health insurance market and health care system reforms," Schoen said.

In California, employer premiums as a percentage of median household income rose by 52% for a family of four over those seven years — from $9,091 in 2003 to $13,891 last year. For individual coverage, the jump was 46%, from $3,293 in 2003 to $4,811 in 2010.

Across the country, increases in family coverage ranged from 33% in Idaho to 70% in Mississippi. Premiums for family coverage were highest in New York, Rhode Island, Connecticut, Florida, New Hampshire and Washington, D.C., ranging from $14,730 to $15,206.

Even in states registering the lowest rates, costs were high, according to researchers. Premiums ranged from $11,379 to $12,409 in Idaho, Arkansas, Hawaii, Montana and Alabama, the five states with the lowest average costs for private employer-based coverage.

The report includes an interactive map that provides a graphically sobering perspective of rising health insurance rates. The map, which allows viewers to click on states individually, uses a color-coded system to show increases.

The lighter the color, the lower the health care premium’s percentage of wages.

For 2003, California has the lightest of three shades of blue. Sprinkled around the country are more than a dozen white states where health coverage represented less than 14% of a household’s earnings. Only one state — West Virginia — is dark blue in 2003, signifying a 20% threshold.

The map has a sliding trigger to show incremental changes over the seven-year period. Pulling the trigger slowly over the entire map paints an increasingly dark portrait of the country. In 2010, there are no white states and the darkest of blues is dominant.

Workers Paying More for Less-Comprehensive Coverage

Employees are paying more for employer-provided policies in every state, according to the survey. Workers’ share of health insurance costs rose by 63% over the seven-year period to a national average of $3,721 annually for a family policy. Despite paying more, employees are getting less-comprehensive coverage, researchers said.

The report shows that deductibles for an individual policy increased by an average of 98% nationally, from an average of $518 in 2003 to $1,025 in 2010. For families, deductibles increased by 83%, from $1,079 in 2003 to $1,975 in 2010.

In 2003, not one state had an average deductible of more than $1,000. In 2010, average deductibles exceeded $1,000 in 29 states, according to researchers.

In addition to the cost, the number of deductible polices also increased. In 2003, roughly half of the country’s workers had deductibles in their health care coverage. By 2010, 74% faced a deductible.

If Nothing Changes

If the unprecedented rate of increase over those seven years continues, the report’s authors estimate that the average premium for family health coverage would increase by 72% by 2020, reaching nearly $24,000 annually.

The authors point to several changes in ACA designed to slow the increase in premiums, including broadening the field by mandating that almost everyone in the country get health insurance. Report authors said affordable insurance options available through new state insurance exchanges, rules limiting insurance administrative costs and profits as a share of premiums, and review of excessive insurance premium increases will help.

Johnston from the California Association of Health Plans agrees that state exchanges can help bring costs down.

"We can’t bring the price of health insurance down without addressing the underlying costs that drive premium prices up," Johnston said. "We’re optimistic that programs like the Health Benefit Exchange will produce real, long-term results for Californians who struggle with rising costs."