Presenting on behalf of the author team State Trends in Premiums and Deductibles, 2003-2010: The Need for Action to Address Rising Costs Cathy Schoen Senior Vice President The Commonwealth Fund Presenting on behalf of the author team www.commonwealthfund.org cs@cmwf.org November 16, 2011

Summary of Main Findings 2 Summary of Main Findings Private Employer Premiums have been going up far faster than incomes in all states Employee direct payments for their share of premiums has risen even faster Working Families are paying more for less protection Deductibles have doubled, in large as well as small firms. Highest in small firms If historic trends before the Affordable Care Act continue annual premiums would average $24,000 by 2020 Affordable Act provisions have the potential to reduce the rate of growth while improving coverage protection Realizing the potential will require joint action, spreading reforms and a focus on private – not just public costs

Health Insurance Premiums for Family Coverage, by State, 2010 3 Health Insurance Premiums for Family Coverage, by State, 2010 Dollars State average = $13,871 Premiums Increased by 50 Percent on Average from 2003 to 2010 Source: 2010 Medical Expenditure Panel Survey–Insurance Component.

4 Employer Premiums as Percentage of Median Household Income for Under-65 Population, 2003 and 2010 62 percent of under-65 population live where premiums are 20 percent or more of income by 2010 2003 2010 WA OR ID MT ND WY NV CA UT AZ NM KS NE MN MO WI TX IA IL IN AR LA AL SC NC KY FL MI WV PA NY AK ME VT NH MA RI DE DC HI CO GA MS OK NJ SD VA CT MD TN OH WA OR ID MT ND WY NV CA UT AZ NM KS NE MN MO WI TX IA IL IN AR LA AL SC TN NC KY FL OH MI WV PA NY AK ME VT NH MA RI DE DC HI CO GA MS OK NJ SD VA CT MD Less than 14% 14%–16.9% 17%–19.9% Median Rate: 14.9% Median Rate: 19.5% 20% or more Sources: 2003 and 2010 Medical Expenditure Panel Survey–Insurance Component (for total average premiums for employer-based health insurance plans, weighted by single and family household distribution); 2003–04 and 2009–10 Current Population Surveys (for median household incomes for under-65 population).

5 Employee Average Annual Contribution for Family Coverage Premium Increased 63% from 2003 to 2020 Dollars per year for family coverage paid by employees Source: Medical Expenditure Panel Survey–Insurance Component (employee premium share for 2003 and 2010).

6 Private Health Insurance Deductibles: State Averages by Firm Size and Household Type, 2003–2010 2003 2010 Percent Change Average All Firms Single Person Plan $518 $1,025 98% Family Plan $1,079 $1,975 83% Average Small Firms $703 $1,447 106% $1,575 $2,857 81% Average Large Firms $452 $917 103% $969 $1,827 89% Note: Small firms = firms with less than 50 employees; large firms = firms with 50 or more employees. Source: Medical Expenditure Panel Survey–Insurance Component, 2003 and 2010.

7 Total Premiums for Family Coverage, 2003, 2010, 2015, and 2020 if Historic Trends Continue Health insurance premiums for family coverage (dollars) * Premium estimates for 2015 and 2020 using 2003–10 historical average national growth rate. Source: Medical Expenditure Panel Survey–Insurance Component (premiums for 2003 and 2010).

Affordable Care Act Potential for New Directions 8 Near universal coverage and affordable plan choices for individuals and small businesses in state exchanges Medicaid expansion and premium tax credits for private health plans for families earning up to $89,400 Essential health benefit standard with cost-sharing limits Reduce costs and slow the rate of cost growth State/federal rate review for increases of 10% or more now in effect; new rules for medical claims as a share of premiums with rebates to consumers in Aug. 2012 Market reforms and exchanges to reduce administrative costs, create broad risk pools, achieve scale economies Payment and system reforms to slow cost growth and improve access, quality and safety Potential to reduce annual rate of increase by 1% or more if reforms creatively applied and spread to private insurance

Projected Annual Savings in Family Premiums, 2015 and 2020 9 Projected Annual Savings in Family Premiums, 2015 and 2020 2015 2020 U.S. average premium at 2003–10 historic rate of increase $18,167 $23,793 1% Slower Growth 1.5% Slower Growth U.S. average premium with savings $17,322 $21,633 $16,912 $20,620 U.S. average savings –$844 –$2,161 –$1,255 –$3,173 Average savings for lowest 10 premium states (ID, AR, HI, MT, AL, NV, SD, ND, UT, TN) –$748 –$1,914 –$1,112 –$2,812 Average savings for highest 10 premium states (ME, MA, DE, IL, NY, RI, CT, FL, NH, DC) –$904 –$2,312 –$1,343 –$3,396 Source: Medical Expenditure Panel Survey–Insurance Component; Premium estimates for 2015 and 2020 using 2003–10 historical average national growth rate.

Premium contribution as a share of income Premium Tax Credits and Cost-Sharing Protections Under the Affordable Care Act 10 Federal Poverty Level Income Premium contribution as a share of income Out of Pocket limits Actuarial value: Silver plan <133% S: <$14,484 F: <$29,726 2% (or Medicaid) S: $1,983 F: $3,967 94% 133%- 149% S: $16,335 F: $33,525 3.0%–4.0% 150%–199% S: $21,780 F: $44,700 4.0%–6.3% 87% 200%–249% S: $27,225 F: $55,875 6.3%–8.05% S: $2,975 F: $5,950 73% 250%–299% S: $32,670 F: $67,050 8.05%–9.5% 70% 300%–399% S: $43,560 F: $89,400 9.5% S: $3,967 F: $7,933 >400% S: >$43,560 F: >$89,400 — S: $5,950 F: $11,900 Four levels of cost-sharing: 1st tier (Bronze) actuarial value: 60% 2nd tier (Silver) actuarial value: 70% 3rd tier (Gold) actuarial value: 80% 4th tier (Platinum) actuarial value: 90% Catastrophic policy with essential benefits package available to young adults and people who cannot find plan premium <=8% of income Note: Actuarial values are average percent of medical costs covered by a health plan. Premium and cost-sharing credits are for silver plan. Source: Federal poverty levels are for 2011; Commonwealth Fund Health Reform Resource Center: What’s in the Affordable Care Act? (PL 111-148 and 111-152), http://www.commonwealthfund.org/Health-Reform/Health-Reform-Resource.aspx.

Looking Forward: Building on Affordable Care Act 11 Looking Forward: Building on Affordable Care Act Past two decades trends spell higher premiums and worse coverage Premiums up and buying less protective benefits Squeeze on businesses and families across the country Health and Economic security at risk if private insurance trends continue Uninsured and under-insured Sacrificing wage and job growth to maintain benefits Affordable Care Act Potential for New Directions Near universal coverage Premium oversight; rebates in 2012 Better coverage and premium assistance: 2014 Slowing the rate of cost growth will require spread of payment reforms and focus on total health system