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Dive Brief:
- A rise in healthcare spending is driving premium increases, according to a new study published by researchers from Yale University and the University of Wisconsin-Madison.
- Researchers found that growth in health spending accounted for over 90% of premium growth between 2011 and 2024.
- By contrast, insurer markups decreased during the study period, countering concerns that major insurers are raising premiums mainly to pad profits. Markups fell from 18.6% of premiums in 2011, to less than 15% in 2024.
Dive Insight:
The new study, published in JAMA Health Forum last week by Zack Cooper of the Yale School of Public Health and National Bureau of Economic Research, and Stuart Craig of the University of Wisconsin-Madison’s Wisconsin School of Business, analyzed state-level premium increases in the large-group, small-group and health exchange markets.
Cooper and Craig found that insurance premiums increased 78.4% between 2011 and 2024, while health spending rose 84.2%.
Insurers have said that the rise in healthcare spending — driven by factors like rising drug spending and cost increases tied to hospital consolidation — has driven the increase in premiums.
The study bolstered these claims, finding that health spending growth accounted for the vast majority (91%) of premium increases.
Still, that hasn’t stopped the American public from pointing the finger at insurers. A June survey commissioned by the hospital-backed Coalition to Strengthen America’s Healthcare found that 47% of people said corporate health insurers were the principal driver of rising spending.
Premium growth has been pressuring workers. About 38% of people with employer-sponsored coverage say they worry about affording their monthly premiums, according to health research firm KFF, compared to about half of U.S. adults who purchase health insurance directly from an insurer.
In 2024, average annual premiums for employer-sponsored health insurance rose to $8,951 for individuals and $25,572 for families, according to data from the CMS.
“Given the high burden insurance premiums are placing on the US public, understanding the mechanisms behind insurance premium growth is critical to being able to introduce policies that can successfully slow the growth in premiums,” the researchers wrote in the study.
Efforts to slow insurance premium growth should focus on reducing the growth of health spending, researchers said.
