1. State Trends in Premiums and Deductibles, 2003-2011: Eroding Protection and Rising Costs Underscore Need for Action Cathy Schoen Senior Vice President The Commonwealth Fund Presenting on behalf of the author team www.commonwealthfund.org cs@cmwf.org December 11, 2012

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 more than doubled –Up large as well as small firms but highest in small firms If trends before the Affordable Care Act continue annual premiums would average nearly $25,000 by 2020 Affordable Act provisions provide a platform on which to build to slow future costs growth - with secure coverage Realizing the potential will require joint action –Focus on private not just public costs 2

3. Health Insurance Premiums for Family Coverage Annual Total Cost by State, 2011 Source: 2011 Medical Expenditure Panel Survey–Insurance Component. Dollars Premiums Increased by 62 Percent on Average from 2003 to 2011 U.S. average = $15,022 3

4. Major Cities: Average Total Premiums for Family Coverage, 2011 U.S. Average: $15,022 Data source: 2011 Medical Expenditure Panel Survey–Insurance Component. See Lippa and Schoen, Trends in Major Metropolitan Areas 2003 through 2011, Commonwealth Fund December 2012.,

5. Sources: 2003 and 2011 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 2010–11 Current Population Surveys (for median household incomes for under-65 population). ND SD DC ID DE IA IN WI CA HI KS UT AZ NM AR LA KY VA VT NH MA CT RI NJ AK AL MS MI ME WV MDCO NE WY OR IL TN NC SC GA FL PA NY OH MO MN OK TX MT NV WA ND SD DC ID DE IA IN WI CA HI KS UT AZ NM AR LA KY VA VT NH MA CT RI NJ AK AL MS MI ME WV MD CO NE WY OR IL TN NC SC GA FL PA NY OH MO MN OK TX MT NV WA 80 percent of under-65 population live where premiums are 20 percent or more of income by 2011 Less than 14% 14%–16.9% 17%–19.9% 20% or more Employer Premiums as Percentage of Median Household Income for Under-65 Population, 2003 and 2011 Median Rate: 14.9%Median Rate: 21.1% 5

6. Dollars per year for family coverage paid by employees Source: Medical Expenditure Panel Survey–Insurance Component (employee premium share for 2003 and 2011). Employee Average Annual Contribution for Family Coverage Premium Increased 74% (average) from 2003 to 2011 6

7. 20032011 Percent Change Average All Firms Single Person Plan $518$1,123117% Family Plan $1,079$2,220106% Average Small Firms Single Person Plan $703$1,561122% Family Plan $1,575 $3,329111% Average Large Firms Single Person Plan $452$1,010123% Family Plan $969 $2,052112% Private Health Insurance Deductibles More than Doubled: State Averages by Firm Size and Plan Type, 2003–2011 Note: Small firms = firms with fewer than 50 employees; large firms = firms with 50 or more employees. Source: Medical Expenditure Panel Survey–Insurance Component, Private Employers 2003 and 2011. 7

8. Total Premiums for Family Coverage by 2015 and 2020 if Trends Continue Health insurance premiums for family coverage (dollars) * Premium estimates for 2015 and 2020 using 2003–11 historical average annual national growth rate. Source: Medical Expenditure Panel Survey–Insurance Component (premiums for 2003 and 2011). 8

9. Affordable Care Act Platform for New Directions 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 $92,200 –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 –New rules for medical claims as a share of premiums with rebates to consumers starting Aug. 2012 ($1.1 B) –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 creatively applied and spread to private insurance 9

10. 2015202020152020 U.S. average premium at 2003–11 historical rate of increase $18,751$24,740$18,751$24,740 1% Slower Growth1.5% Slower Growth U.S. average premium with savings $18,052$22,712$17,709$21,754 U.S. average savings–$700–$2,029–$1,042–$2,986 Average savings for lowest 10 premium states (AR, AL, IA, TN, ID, MS, UT, ND, LA, NV) –$617–$1,788–$918–$2,632 Average savings for highest 10 premium states (WV, CA, DE, AK, CT, VT, NY, DC, NH, MA) –$760–$2,204–$1,132–$3,244 Source: Medical Expenditure Panel Survey–Insurance Component; Premium estimates for 2015 and 2020 using 2003–11 historical average national growth rate. Projected Annual Savings in Family Premiums, 2015 and 2020 10

11. Annual premium amount paid by family and premium tax credit Affordable Care Act 2014: Annual Premium Amount and Tax Credits for a Family of Four at Various Income Levels Notes: Family of four, policy holder age 40 in a medium-cost area in 2014. Premium estimates based on an actuarial value of 70%. Actuarial value is the average percent of medical costs covered by a health plan. FPL refers to federal poverty level. Source: Premium estimates are from Kaiser Family Foundation Health Reform Subsidy Calculator http://healthreform.kff.org/Subsidycalculator.aspx. http://healthreform.kff.org/Subsidycalculator.aspx Required premium payment by policy holder Premium tax credit Max 3.3% of income Max 4.0% of income Max 6.3% of income Max 8% of income Max 9.5% of income $32,326$35,137$46,850$58,562$70,275$117,125 Full premium = $12,130 11

12. Looking Forward: Need for Action to Build on Reforms Past two decades: higher premiums and eroding coverage –Premiums up and buying less protective benefits –Squeeze on businesses and families across the country Health and economic security at risk if trends continue –Uninsured and under-insured –Sacrificing wage and job growth to maintain benefits Affordable Care Act = Platform for new directions –Near universal coverage and benefit standards: 2014 –Premium oversight, rebates 2012; Market rules and exchanges 2014 Slowing the cost growth will require spread of payment reforms and focus on total health system –Private growing faster than public per person –Need for action to hold care systems and private insurers accountable for better outcomes at lower costs 12