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Health Reform 101

with Lisa Zamosky

WebMD helps readers understand their health insurance and the new health care reform law. The Affordable Care Act is bringing sweeping changes to American health care. Lisa Zamosky is here to help you navigate the health care maze and understand how these changes affect you.

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Thursday, December 13, 2012

Health Insurance Costs Rise Faster than Income

By Lisa Zamosky

Pills and Money

If you get health insurance at work and recently selected your 2013 health benefits, it’s likely no surprise to hear that the cost of health insurance continues to rise.

A new report by the private health care foundation, the Commonwealth Fund, analyzed state trends in employer-based health insurance costs in 41 metropolitan areas across the country. Nationwide, prices jumped by an average of 61% for family coverage between 2003 and 2011, rising faster than Americans’ earnings, which rose by just 10% during the same period.

Eating Away at Your Wages

Today, the average annual cost of a family health plan is about $15,000. If trends continue, the Commonwealth Fund projects it will exceed $25,000 by the year 2020.

American families saw their share of insurance premiums rise on average by 69% between 2003 and 2011. Today, total health insurance premiums eat up 20% or more of the annual median family income in 35 states. That means that eight in 10 people of working age in this country spend at least 20 cents of every dollar they earn to pay for health insurance.

Deductibles are going up too. They have more than doubled during the eight-year period studied. In 2003, an average family plan came with a $1,079 deductible.  By 2011, families paid $2,220 out of their own pockets — an increase of 106% — before insurance helped to pay the bills.

“Not only are our health benefits leaving us exposed to financial hardship, over the past decade, we’ve continued to spend more for insurance coverage that covers fewer of our costs,” said the Commonwealth Fund’s Senior Vice President for Policy, Research and Evaluation, Cathy Schoen on a call with reporters.

To see how insurance rates have increased over time as a percentage of median household in your home state, check out the Commonwealth Fund’s interactive map.

Lowering Costs Long Term

The report concludes that the Affordable Care Act will improve access to insurance coverage and ultimately help to keep costs from rising at such a rapid rate by reforming the way care is delivered and paid for, and with new regulations placed on insurers to keep costs in check.

According to the report: “Early analysis concluded that the payment, delivery system, and insurance market reforms of the Affordable Care Act could slow the rate of health care spending growth by at least 1 percent compared with projected trends without reform.”

But there are others concerned that health reform will actually cause a dramatic increase in costs due in part to new taxes, the requirement that insurers provide richer benefits, and new restrictions on how insurers can charge for a health plan.

Whatever the ultimate outcome, it will likely take a number of years for the insurance markets to stabilize and to determine the law’s impact on health care costs.

Share your experience with rising health insurance costs in the comments section below.

Photo: iStockphoto

Posted by: Lisa Zamosky at 1:00 am

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