State Trends in Premiums and Deductibles, 2003–2011: Eroding Protection and Rising Costs Underscore Need for Action

By Cathy Schoen, Jacob Lippa, Sara Collins, and David Radley
The Commonwealth Fund, December 2012

Across states, the total average premium reached $15,022 per year in 2011 for family coverage, an increase of 62 percent since 2003.

Although premiums are rising more slowly than they were before enactment of the recent reforms, private insurance spending per person is projected to continue to grow more rapidly than incomes over the next decade.

By 2011, there were 35 states in which the annual premium equaled 20 percent or more of income, compared with just one state in 2003. And there are now no states where premiums amount to less than 14 percent of median incomes, compared with 13 such states in 2003.

Although workers are paying more for insurance, their premiums are buying them less financial protection because of the rapid increase in deductibles from 2003 to 2011. The resulting shift of medical care costs onto workers and their families has led to higher out- of-pocket costs for medical bills — on top of higher premium costs. By 2011, 78 percent of workers faced a deductible, compared with about half (52 percent) in 2003.

With the recent recession, millions of workers lost their jobs or were otherwise unable to afford coverage and, as a result, joined the ranks of the uninsured. From 2008 to 2010, the percentage of people with employment-based insurance fell from 58.9 percent to 55.3 percent. An estimated 9 million adults ages 19 to 64 lost a job with health benefits and became uninsured during this period.

Along with rising numbers of uninsured, the nation has seen a rapid increase in the number of underinsured, those at risk of high out-of-pocket costs for medical care although insured all year. As of 2010, estimates indicate 81 million adults under age 65 (44% of all adults) were either uninsured during the year or underinsured, up from 61 million in 2003.

From 2003 to 2010, median family incomes increased by only 10 percent, on average, not enough to keep up with an inflation rate that has increased by 18.5 percent over these seven years.

To date, with highly concentrated insurance markets, the path of least resistance for insurers has been to simply pass on the rising costs of medical care and higher prices, while adding insurance administrative costs and profit margins. In fact, the major national private insurance companies have done well throughout the recession years, with strong pretax profit margins and administrative costs that have largely kept pace with increases in medical care costs.

The national debate on health care costs often centers on the federal deficit and on Medicare’s future. Less attention is focused on the costs of private insurance spending per person, which have been rising faster than Medicare spending per person and are projected to continue to do so over the next decade. The mounting stresses on businesses and families underscore the need for action on behalf of the private sector as well. Absent a significant change in the way private insurance and health care markets function, cost pressures will continue to push up private insurance costs and out-of-pocket medical expenses, if the past two decades are any guide.

The Affordable Care Act’s effectiveness in tackling costs, however, will require collaboration among public and private stakeholders to ensure that markets operate in the broad national interest of better health, more positive health care experiences, and lower future costs.

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It just gets worse. Family insurance premiums are now over $15,000 – more than 20 percent of income in a majority of states. Family deductibles now average over $2000. Family incomes have not kept up with inflation, much less with the cost of health care. Yet private insurers are thriving.

Many are hoping that the Affordable Care Act will provide some relief. The PNHP website ( has a plethora of reports and studies indicating that there is no hope that that we will have truly substantial reform under this Act – only administratively-complex tweaks.

The authors of this report state that the Affordable Care Act’s effectiveness “will require collaboration among public and private stakeholders.” This is the fundamental reason that there is no hope. Under our current dysfunctional financing system, which was left in place by this legislation, that collaboration must be voluntary – an impossibility since each vested interest is jockeying for the most advantageous position.

Under a properly designed single payer system, the publicly-administered policies are designed to ensure collaboration of all parties. What works in the interests of the patients also works in the interests of the collaborators. Until the nation is ready to demand structural reform that benefits us all, we are going to continue to see the numbers in this report grow even worse.