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Insurance Costs Take Toll on Consumers Despite Slower Premium Growth, Study Finds

By Kerry Young, CQ HealthBeat Associate Editor

January 8, 2014 -- While medical inflation has slowed in recent years, many consumers are spending more out of pocket on employer-sponsored health care, according to a report from The Commonwealth Fund.

The average per-person deductible exceeded $1,000 in 2013 in all but three states and the District of Columbia, a situation not found in any state in 2003, the researchers found.

"This report shows that national patterns of growing health cost burdens on workers are mirrored in every state," said David Blumenthal, president of The Commonwealth Fund, said in a statement. "Out-of-pocket costs are up in most states and incomes are not keeping pace. This is of concern, since research shows that high health care cost burdens relative to income may lead people to avoid seeking needed health care."

The report found those living in Southern states, where median incomes are lower than elsewhere in the U.S., face the highest cost burdens.

The authors noted that there has been some "good news" in health costs, with the annual average growth rates for certain employee plans slowing since the enactment of the 2010 health law. The rate dropped to about 4.1 percent from 2010 to 2013, down from an average 5.1 percent from 2003 to 2010.

"Growth in employer premiums and deductibles slowed in many states after passage of the Affordable Care Act," said Sara Collins, vice resident for health care coverage and access at The Commonwealth Fund and a coauthor of the report. "However, slow wage growth means working families in every state are being squeezed by health care costs."

Workers' 2013 contributions to their health insurance premiums in every state amount to a higher share of state median income than they did a decade earlier, the report found. In 15 states, employees' annual payment for their share of premiums rose by 100 percent or more. Workers' out-of-pocket costs for premium contributions and deductibles in 2013 also accounted for a higher percentage of median income in all states compared to 2003.

With premium growth still outpacing income growth, insurance costs amounted to 20 percent or more of the median income in all but 13 states and the District of Columbia in 2013. Ten years earlier, that was the case in only two states, New Mexico and West Virginia.

Average premiums were 25 percent to 28 percent of median income in seven states: Alaska, Arkansas, Kentucky, Nevada, New Mexico, Texas, and West Virginia.

Researchers said both the public and private sector will need to keep premium growth in check without eroding benefits. They urged policymakers to "pursue reforms that improve the quality of health care, rein in cost growth, and ensure that savings are shared with patients and families across the income spectrum."

The health law is a "platform" from which to work toward a more affordable future, the researchers stated. Analysis projects from groups such as the Medicare Payment Advisory Commission (MedPAC) "indicate that such initiatives should focus on prices paid by private insurers, as well as incentives to reorganize the delivery system to improve care experiences and outcomes," the authors wrote.

MedPAC members will meet this month to discuss a new set of recommendations to Congress. The panel has been a strong advocate for moving away from the current fee-for-service model for Medicare toward a more coordinated model in which savings may be found, while improving care. With annual spending of about $600 billion, Medicare holds great sway on domestic health policy, influencing decisions that can extend even beyond the care of the disabled and elderly.

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