A report released by the Commonwealth Fund last week that tracks state trends in employer health insurance coverage hit home just how fast insurance premiums are rising. The study, “Premiums and Deductions, 2003-2011: Eroding Protection and Rising Costs Underscore the Need for Action,” finds that health insurance costs rose far faster than incomes in all states. Average family premiums jumped 62 percent from 2003 to 2011, while median family incomes rose just 11 percent, as workers paid more out-of-pocket and deductibles have more than doubled.
“The steady increase in healthcare costs over the past decade underscores the urgent need to build on the groundwork laid by the Affordable Care Act to slow the growth in private insurance costs,” said Commonwealth Fund senior vice president Cathy Schoen, lead author of the report. In 2011, average annual premiums for family plans ranged from $12,400 to $13,500 in the lowest-cost states (Arkansas, Alabama, Iowa, Tennessee, Idaho, Mississippi, Utah, and North Dakota), to more than $15,000 a year in 21 states. Premiums ranged from $16,000 to nearly $17,000 in Delaware, Alaska, Connecticut, Vermont, New York, the District of Columbia, New Hampshire, and Massachusetts, which have the highest annual premiums.
While the report’s authors also note that the Affordable Care Act lays the groundwork for lowering the cost growth and improving and expanding insurance coverage, they conclude that more will need to be done to confront the forces driving up the cost of care in private insurance markets.
The difficulty of reaching that goal became apparent last Friday, when the Obama administration said that more than half of the states rejected its efforts to set up their own health insurance exchanges. States have three options: build a fully state-based exchange; enter into a state-federal partnership; or default into a federally facilitated exchange.
As noted by the Kaiser Family Foundation, by December 14, the deadline for the states to inform the administration whether they would opt for a state-operated exchange, 17 states declared they would operate a state-based exchange, seven were planning for a state-federal partnership, and 25 would default to the federal exchange. Of the states with the lowest average annual family premiums, three (Idaho, Mississippi and Utah) opted to go ahead with the state-based exchange; three (Alabama, Tennessee and North Dakota) said they would default to the federal exchange; and two (Arkansas and Iowa) are planning for a state-federal partnership. Of the states with the highest premiums, four states (Connecticut, Vermont, New York and Massachusetts) and the District of Columbia said they would operate their own exchanges; two (Alaska and New Hampshire) opted to default to the federal exchange; and one (Delaware) said it was planning for a state-federal partnership.
The New York Times on December 14 said reasons cited by governors for declining to opt for state-run exchanges ranged from lack of direction from Washington on operational questions to lack of authority to govern the program. (One, C.L. Otter of Idaho, which opted for state-run exchange, hardly embraced the idea, complaining of overarching federal authority of the Accountable Care Act, and adding that the health exchange decision could be rescinded, according to the Times.)
Overall, though, operational issues could be the biggest obstacle for states. As noted by HCI Editor-in-Chief Mark Hagland in a November interview with Jordan Battani, managing director of the Waltham, Mass.-based Global for Emerging Health Care Services of Falls Church, Va.-based CSC, laying the IT foundation for exchanges is going to be a major challenge for states; two in particular are determination of eligibility, which varies from state to state for Medicaid, and interoperability issues that will allow information to flow freely between state and federal agencies.
While consumers in all states will have access to health insurance through the exchanges, there’s nothing clear cut in the underlying mechanisms for making exchanges happen in the face of rapidly approaching deadlines.