Premiums for family coverage increased 6.1% in 2007. While premiums continue to rise, this is the fourth consecutive year that premium increases were less than they were in the previous year.1 The average premium increase in 2007 is the lowest since 1999.
While lower than in recent years, the 6.1% increase in the cost of coverage exceeds the overall rate of inflation by about three and a half percentage points and the increase in workers’ earnings by almost two and a half percentage points. Since 2001, the cost of health insurance has increased by 78%.
The average cost of family coverage is $12,106 a year.
Premium Increases
- The cost of health insurance rose 6.1% in 2007, which is lower than the 7.7% increase for 2006 but still much higher than the overall rate of inflation (2.6%) or the increase in workers’ earnings (3.7%) (Exhibit 1.1).
- Small firms (3-199 workers) and large firms (200 or more workers) reported a comparable rate of increase (5.5% vs. 6.4%) (Exhibit 1.4).
- There is variation in premium increases across workers and firms: 10% of covered workers work in firms that experienced premium increases of greater than 15%, while 46% of covered workers work in firms that experienced premium increases less than or equal to 5% (Exhibit 1.5).
- The average premium increase for HMOs (8.3%) is statistically greater than the overall average premium increase for all plan types (Exhibit 1.7). The average premium increases for conventional plans, PPOs, POS plans, and HDHP/SOs are not statistically different from the average premium increase.
- Premium equivalents in self-funded plans rose at a similar rate as premiums in fully insured plans (6.0% vs. 6.2%) (Exhibit 1.8).
Premium Costs for Single and Family Coverage
- The average cost of premiums for single coverage in 2007 is $373 per month or $4,479 per year. This figure includes both the worker and employer contribution. The average cost of premiums for family coverage is $1,009 per month or $12,106 per year (Exhibit 1.12).
- Covered workers in PPO plans, the plan type with the highest enrollment, have higher average premiums than covered workers in HMOs and HDHP/SOs for both single and family coverage. Covered workers in HDHP/SOs have lower average premiums than workers in HMOs, PPOs, and POS plans for single coverage and PPOs and HMOs for family coverage.
- Premiums for covered workers in small firms (3-199 workers) are similar to those for workers in large firms (200 or more workers) for both single and family coverage (Exhibit 1.12).
- Similar to premium increases, there is also a great deal of variation in premiums across workers and firms: 7% of covered workers work in firms that have single premiums of $250 or less per month, while 28% have single premiums greater than $400 per month (Exhibit 1.15).
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