Private Health Insurance
Growth in private health insurance premiums is estimated to have accelerated, but remained low, reaching 2.6 percent in 2010 (up from 1.3 percent in 2009) and accounted for $822.3 billion (Exhibit 5). A drop of 5.1 million in the number of people enrolled in private health insurance was the major reason for this slow growth. Additionally, because growth in the use of services was slower than was anticipated when premiums were originally set, the net cost of insurance, or the difference between premiums collected and benefits paid, grew significantly in 2010 at 8.7 percent.
Also in 2010, private health insurance benefit payments totaled an estimated $725.5 billion, representing an increase of just 1.9 percent (down from 2.8 percent in 2009). This historically low rate of growth was influenced by the same factors that contributed to the relatively low premium growth, namely the drop in the number of private health insurance enrollees, as well as slowing growth in the use of some services (such as elective hospital procedures and physician visits).
For 2011–13, private health insurance enrollment is projected to increase by 4.0 million as employment levels increase and more individuals are covered by employer-sponsored insurance due, in part, to the Affordable Care Act. Notably, growth in benefits per enrollee is expected to fall from 4.7 percent in 2010 to below 3 percent in 2011 due, in part, to the Affordable Care Act’s expansion of coverage to relatively less-expensive benefits for children under age twenty-six who can join their parents’ policies.
In 2014, growth in private health insurance premiums is expected to accelerate to 9.4 percent, 4.4 percentage points higher than in the absence of health reform, as an estimated 13.9 million people obtain coverage through exchange plans. At that time, private health insurance is anticipated to account for roughly 31 percent of national health spending, or about the same share as was expected without enactment of the Affordable Care Act.
For 2015–20, growth in private health insurance premiums is expected to slow somewhat and average 5.6 percent annually. Underlying this expectation is that some employers of low-wage workers will stop offering health coverage (and many of their employees will move to the exchange plans, while others move into Medicaid or become uninsured). Also, as discussed earlier, in 2018, the excise tax on high-cost employer-based insurance plans will take effect, placing further downward pressure on health insurance premiums.