The combination of higher health care premiums and out-of-pocket costs is putting working families’ budgets under stress across the country, according to a new analysis of state trends.

Premiums for employer-sponsored family health insurance increased an average of 41 percent across states from 2003 to 2009, more than three times faster than median incomes, according to a report released by the Commonwealth Fund last week. Meanwhile, deductibles per person rose 77 percent, on average.

The combination of higher premiums and higher out-of-pocket costs is putting working families’ budgets under stress across the country, the non-partisan health care and policy think-tank’s report, titled State Trends in Premiums and Deductibles, 2003-2009, makes clear.

“Health insurance is increasingly unaffordable for families, and benefits are being scaled back as employers and workers struggle to keep up in a difficult economy,” Commonwealth Fund President Karen Davis said in an announcement of the findings.

The report, which provides a state-by-state analysis of private employer health insurance costs for those six years, determined that, as of 2009, the average premium for all states was $13,027 a year for family coverage for private-sector employers, ranging from $11,000 to more than $14,000 across states.

The analysis of state trends for the 2003-2009 period indicate that employer-based premiums for family coverage increased an average of 41 percent across states, ranging from a 21 percent increase in Delaware to a 59 percent increase in Louisiana. By 2009, premiums were highest in Alaska, Connecticut, Massachusetts, Vermont, Wisconsin and Wyoming, with family premiums in those states exceeding $14,000 a year. Annual family premiums in the lowest-cost states — Alabama, Arkansas, Hawaii, Idaho, Kansas, Montana, North Dakota, Ohio, Oklahoma, South Dakota and Utah — were also high, ranging from $11,000 to $12,000 per year by 2009.

At the same time, deductibles rose sharply in almost all states, increasing an average of 77 percent from 2003 to 2009 among large and small firms. In addition, more workers are paying deductibles — 74 percent faced a deductible in 2009, up from 52 percent in 2003.

Another recent survey suggests that companies are shifting more of the cost of health insurance directly onto their workers. The Commonwealth Fund report is based on federal data through 2009, but a September study by the Kaiser Family Foundation found that employers’ health insurance premium costs went up by 3 percent in 2010, while the amount paid directly by employees rose 14 percent.

If premium costs for employer-sponsored health plans in each state continue to grow at the same average annual rate seen from 2003 to 2009, the average premium for family coverage will increase 79 percent — to $23,342 — by 2020, according to the report.

Premiums for employer-sponsored coverage include the amounts paid by employers and employees combined.

“The good news is that the Affordable Care Act [ACA] reforms provide a foundation to improve coverage and slow health care cost growth in the future,” Commonwealth Fund Senior VP Cathy Schoen, the lead author of the study, said in a statement.

The Commonwealth Fund supports the new ACA health care law, saying its reforms and state-based private exchanges could increase value in U.S. health insurance markets and help slow the growth of premiums.

“If reform succeeds in slowing the annual rate of growth by 1 percentage point in all states, by 2020 annual savings on family health coverage could average $2,323, compared with projected rates if trends over the past six years continue,” the report states. “If growth could be slowed by 1.5 percentage points, the savings would be even larger — $3,403 per year.”

Further analysis suggests that the incentives for administrative efficiency and modernization included in the ACA have the potential to save businesses and families $2,000 or more in premium costs by 2019.

Of course, such savings are not guaranteed, as the overall success of the ACA reform hinges on the cooperation of a diverse set of stakeholders, both public and private. However, Davis noted, “if implemented well, provisions in the ACA — including some starting this year… — have the opportunity to reverse these unsustainable increases and ensure that families in every state have access to affordable, comprehensive health insurance.”

It remains to be seen exactly how the health care law will affect the trends highlighted in the Commonwealth Fund’s findings. As the Washington Post notes, industry experts say “figuring out how the new law will affect health-care costs, and therefore premiums, is among the trickiest issues surrounding the statute.”

Resources

State Trends in Premiums and Deductibles, 2003-2009…
by Cathy Schoen, Kristof Stremikis, Sabrina How and Sara Collins
The Commonwealth Fund, Dec. 2, 2010

…Employer Health Insurance Premiums Increased 41 Percent from 2003 to 2009…
The Commonwealth Fund, Dec. 2, 2010

Employer Health Benefits 2010 Annual Survey
The Kaiser Family Foundation and the Health Research & Educational Trust, Sept. 2, 2010

Family Health Premiums Rise 3 Percent … but Workers’ Share Jumps 14 Percent as Firms Shift Cost Burden
The Kaiser Family Foundation and the Health Research & Educational Trust, Sept. 2, 2010

Health Premiums Surge 41%; Md., D.C. Among Costliest Areas to Insure
by Lena H. Sun
The Washington Post, Dec. 2, 3010