Health Insurance Premiums

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Rising Health Insurance Premiums Will Increase Problems of Coverage and Quality

After several years of restrained increases, health insurance premiums are rising faster than ever at four times the rate of inflation, according to a report issued today by the National Coalition on Health Care. These rates of increase are expected to continue over the next three years and will result in more people — especially middle-class families and those working in small businesses — to become uninsured says the report, DÈjý vu All Over Again – The Soaring Cost of Private Health Insurance and Its Impact on Consumers and Employers.

While overall premium increases of from 9-12% are expected in 2000, many small employers are experiencing 15-20% increases. When premiums rise, employers are often forced to shift more costs to employees or to cut or eliminate health benefits. Such actions, in turn, result in many workers becoming uninsured because they can not afford the additional cost of their employers’ insurance or individual insurance.

If a 12% increase in premiums occurs in 2000, the report estimates that an additional 750,000 people could lose their health insurance. Using the lowest projected increase of 9%, an additional 600,000 could be added to the more than 1 million who are already becoming uninsured each year.

“Over the past several years, a great deal of attention has been focused on the problems of quality and the uninsured in health care, and a number of incremental steps have been advanced or adopted in an attempt to deal with these issues,” said Henry E. Simmons, M.D., M.P.H., F.A.C.P., president of the Coalition. “At the same time, cost has received less attention, because it was assumed by many that managed care had successfully addressed that issue. As this report points out, premiums are rising at rates greater than ever before, and the resulting increases in health care costs will exacerbate the already serious, and interrelated, problems of coverage and quality,” he added.

According to Joel E. Miller, the Coalition’s Director of Policy and author of the report, several forces have converged recently that have led to a resurgence in double-digit increases in private health insurance. These forces include some old “cost drivers” that continue to place upward pressure on premiums, including:

  • New medical technology
  • Aging of the population
  • Overuse and misuse of medical services
  • Oversupply of health care facilities
  • High administrative costs
  • Cost shifting

Additional new cost drivers, both economic and demographic, have begun to intensify the pressure on premiums, including:

  • Health plan underwriting cycle. This pricing phenomenon is the need for insurers and health plans to make up for flat or declining premiums compared to costs in the previous cycle
  • Pressure on health plans to raise premiums — by Wall Street to be profitable and by regulators to be solvent
  • Pharmaceutical costs and utilization
  • Tougher provider negotiations with health plans
  • Consumer demands for easier and broader access to care
  • The medical needs and demands of 77 million baby boomers

The groups most affected by high and escalating health insurance premiums are those groups who can least afford coverage:

  • Low- and -middle income working families
  • Young adults ages 18 to 24
  • Minority and immigrant populations
  • People who are self-employed or have part-time jobs
  • Workers who are employed in small firms who significantly share the costs of employment-based health insurance coverage

Copies of the report are available on the Coalition web site at or by calling (202) 638-7151.

The National Coalition on Health Care is the nation’s most broadly representative non-partisan, non-profit alliance working to improve America’s health and health care system. Its nearly 100 members include large and small businesses, labor unions, consumer groups, health professional and religious organizations. Former presidents George Bush, Jimmy Carter, and Gerald R. Ford serve as the Coalition’s Honorary Co-Chairs. Robert D. Ray, former Republican Governor of Iowa, and Paul G. Rogers, former Democratic Congressman from Florida, are the Coalition’s Co-Chairs.

Download Full Report (.pdf file)

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