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Health insurance: US paying more for less, report finds

Health insurance premiums have shot up more than 60 percent in the last eight years, and if they keep up at this pace the average family of four will be paying $25,000 a year just for health insurance, according to a report released Wednesday.

At the same time, deductibles are also going up for employer-sponsored plans, so workers are paying more and more for less and less, the non-profit Commonwealth Fund said.

“Workers are paying more for less financial protection when they get sick,” said Commonwealth Fund senior vice president Cathy Schoen, who led the team writing the report.

Currently, according to the Kaiser Family Foundation, an average worker with employer-sponsored health insurance pays between about $15,000 to $16,000 a year for that coverage. Workers at bigger firms pay more. Coverage is about $5,600 a year for a single person.

The Commonwealth Fund, a private foundation that conducts health policy reform research, did a state-by state look at health insurance premiums and deductibles and used Census Bureau data on earnings for the report, which covers 2003 to 2011.

“Premiums for family coverage increased 62 percent across states -- rising far faster than income for middle- and low-income families,” the report says. “At the same time, deductibles more than doubled in large and small firms. Workers are thus paying more but getting less-protective benefits. If trends continue at their historical rate, the average premium for family coverage will reach nearly $25,000 by 2020.”

One big reason for the rising premiums? Rising expenses. “Broad evidence of poorly coordinated care, duplicative services, and administrative waste, as well as rising prices charged to those privately insured, signal that greater efforts are needed to slow cost growth in both private and public insurance markets,” the report finds.

This isn’t controversial. Earlier this year the independent Institute of Medicine made a formal pronouncement on what think-tanks and academic institutions had been saying for years. It said the U.S. health care system wasted $750 billion in 2009, about 30 percent of all health spending, on unnecessary services, excessive administrative costs, fraud, and other problems.

“The U.S. health insurance system remains highly fragmented, marked by elevated spending on admin­istration and an inability or unwillingness to combat high health care costs in private insurance markets. Our system includes Medicare coverage for those 65 and older and some disabled individuals, state-operated Medicaid programs, and an array of competing private insurance plans,” the report adds.

The Commonwealth Fund has been a big fan of the Affordiable Care Act, the 2010 health reform law known widely by supporters and opponents alike as Obamacare. And the report says the legislation will do a lot to lower costs, but not enough.

“Health insurance is expensive and has become less affordable, no matter where one lives. Insurance premiums rose sharply in all states during these eight years and, because wages failed to keep pace, increased as a share of median household income,” the report says.

“The net result is that it is more difficult for many insured workers and their families to save for education or retirement -- or simply to meet day-to-day living expenses.”

And, the group says, the economy has made things worse. “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,” the report says.

“An estimated 9 million adults ages 19 to 64 lost a job with health benefits and became uninsured during this period.”

Michael Ramlet, a health economist at the right-leaning American Action Forum, says one reason health insurance costs actually slowed during the recession is that people stopped getting anything but the most essential health services.

“That is starting to change as you have this slow recovery,” Ramlet said in a telephone interview.

He thinks expenses will go up even more as the Affordable Care Act’s requirements kick in. These include the so-called essential health benefits -- the minimum requirements for the health insurance plans that people will buy on the open market starting in 2014. These aren’t the same plans as those offered by employers, but Ramlet thinks the federal requirements will make these new retail plans pricey.

“They are very rich,” he said.  “Economists would warn you there there is no free lunch and more things cost more money.”

Ramlet believes this could affect employer-sponsored insurance. Already some federal requirements such as provision of free health screenings are making employers think twice about offering insurance, he said.  “Honestly I don’t think employers are going to stay in the insurance game for very long,” Ramlet said.

Just this week, the International Foundation of Employee Benefit Plans said more than 85 percent of employers surveyed say they plan to keep offering health insurance to workers. But Ramlet believes those numbers will fall as health insurance becomes more and more expensive.

He also predicts more people will gamble and not buy health insurance at all -- although the health reform law is designed to encourage people to buy it. That could be a risky option when an unanticipated medical emergency can quickly rack up hundreds or even of thousands of dollars in bills.

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