Health Insurance Premiums Rise Sharply in 2011

Health care costs rose sharply this year, further underscoring the problem of uninsured and underinsured Americans, The New York Times reported on Tuesday.

The average insurance premium for employer-sponsored family coverage was $15,073 in 2011, up 9 percent from 2010, outstripping the average increase in wages, according to a study by the nonprofit Kaiser Family Foundation. The new average is about double the average premium of $7,061 in 2001, but average wages have increased by just 34 percent since then.

The average worker in 2011 was responsible for $4,129 of the total premium, up from $1,787 in 2001. That number did not increase significantly from 2010 to 2011.

Interestingly, the number of young Americans who are insured has actually increased, probably because of the provision in President Barack Obama's health care law that allows young adults to stay on their parents' or guardians' insurance through age 26. Previously, family coverage from most insurance companies was only available to young adults while they remained full-time students.

But that hasn't helped policyholders, who are paying increasingly high premiums as insurance companies try to protect themselves against potential future costs, such as the cost of being required to insure people with pre-existing conditions.

The White House released a statement on Tuesday rebutting allegations that the health care overhaul had prompted insurers to raise premiums in order to cover the cost of complying with the new regulations. The statement made three main points: one, that 2011 premiums were set in 2010, when insurance companies thought medical costs would be significantly higher than they turned out to be; two, that starting in 2012, insurance companies will be subject to new regulations that will prevent large premium increases; and three, that although premiums are increasing, their growth is expected to slow down, according to reports from the consulting firm Mercer and from Goldman Sachs.

Insurance companies that want to raise premiums for 2012 by more than 10 percent will have to publicly justify their rate hikes, and a growing number of states have the power to reject unjustified premium hikes, the statement on the White House Web site read. Additionally, insurers are required to spend at least 80 percent of your premium dollars on medical care, rather than advertising, overhead and bonuses for executives. If they fail to meet that standard, they will be required to provide a rebate to their customers.

Those measures will help substantially, the White House predicted, because a report from the first quarter of 2011 showed that 13 of the 14 largest insurers took in much higher profits than expected, meaning the premium increases were not strictly necessary.