This week’s Health Wonk Review includes a very informative article by Brad Wright about the continued rise in out-of-pocket spending on health care by the American people. The study he references includes data indicating that for every population (Medicare/Medicaid, uninsured, group-sponsored health insurance, and individual health insurance), there was an increase between 2001 and 2006 in the percentage of people who were spending at least ten percent of their income on health care. But the group that stands out as being the most hard-hit is those who are purchasing their own health insurance.
These are the clients we work with on a daily basis, and we have definitely seen a significant increase in both premiums and deductibles over the years we’ve been in the individual health insurance market in Colorado. Eight years ago, we frequently saw people selecting deductibles in the $1000 range. These days, it’s rare for our clients to choose deductibles under $2500. HSA qualified plans have become very popular, with people opting to take on the entire cost of the first few thousand dollars of health care expenses each year, in trade for lower premiums than they would get on traditional policies.
In Colorado, the average household income in 2008 was $56,993. The average family health insurance premium for a non-group policy was $5939 in 2009 (see page 6 of the report). With the recession that begin in 2008, it’s reasonable to assume that average household income in 2009 was lower than in 2008. But even if it remained the same, the average premiums for family health insurance policies purchased in the individual market amounted to more than 10% of the average household income in Colorado (and Colorado was on the lower end of the scale in terms of the cost of individual health insurance in 2009, according to the AIHP report referenced earlier). Premiums for health insurance in the individual market are lower than those in the group market, but there’s no employer paying a portion of the premium. And the premiums alone amount to 10% of household income. When you add in the deductibles and other out of pocket expenses, it’s not surprising at all that nearly half of everyone buying insurance in the individual market was considered high-burden in 2006 (spending more than 10% of household income on health care).
One thing that should be noted is that the states at the top of the list (page 6) in terms of the cost of individual health insurance are the ones that require all policies to be guaranteed issue. The median household income in NY in 2008 was $55,980, but the average family health insurance policy in the individual market was $13,296. A whopping 23.7% – just for the premiums, before any other out-of-pocket expenses are included. While making health insurance guaranteed issue does solve the problem of denials based on medical history, it is not a solution in and of itself. This is why the mandate requiring everyone to have health insurance is such an important piece of the equation, as it will help to balance out the premium increases that will go along with covering pre-existing conditions.