How To Lower Health Insurance Premiums

For Small Business, Bad News on Health Care Costs Isn't as Bad

There’s bad news from the workplace: as The New York Times reported on Tuesday, the cost of health insurance rose sharply in 2011 after several years of relatively slow growth. According to the Kaiser Family Foundation ’s annual survey on employer health benefits, the average premium to insure a family of four grew 9 percent, to just over $15,073. For single coverage, premiums rose 8 percent, to $5,429.

But for small firms, those with fewer than 200 employees, the news was not quite so dire. Yes, the cost of coverage grew more sharply than in 2010, but the increase was lower than that for large companies, or overall. Average premiums rose only 6 percent for family plans, to $14,098. For single coverage, the average cost at small companies was $5,326, again up about 6 percent.

It may seem counter-intuitive that smaller companies have lower premiums than large companies, which presumably have more buying power and lower administrative costs. But the Kaiser research suggests a couple of explanations that will resonate with small-business owners. First, high-deductible health plans, which are cheaper than plans with lower deductibles, claim nearly a quarter of the small-group market, a larger share than at big companies. And small-group plans are less generous than plans at big companies. One striking difference is the size of the deductible the worker must pay before insurance kicks in. At large companies, the average deductible for so-called “preferred provider organization” plans (the most common type of plan at both big and small companies) is $505. At small companies, it is $1,202.

So far, small employers have resisted passing on too much of the increase to their workers. The share of premiums paid by the employer has held fairly constant over the last decade — in 2011, small companies paid, on average, 85 percent of the premium for single coverage and 64 percent for family plans. That’s a higher share than big companies pay for single plans, but a much lower share for family plans.

Surprise! ObamaCare doesn't lower health-insurance costs « Hot Air

The Kaiser Family Foundation shows family premiums topped $15,000 a year for the first time in 2011, increasing a whopping 9% this year, three times more than the increase the year before. The study says that up to 2% of that increase is because of the health care law’s provisions, such as allowing families to add grown children up to 26 years old to their policies.

So what about that $2,500 in savings the president pledged? White House deputy chief of staff Nancy-Ann DeParle insists families will see that savings — by 2019.

“Many of the changes in the Affordable Care Act are starting this year, and in succeeding years,” DeParle told ABC News, “and by 2019 we estimate that the average family will save around $2,000.”

DeParle said that the “big increases that occurred last year were probably driven by insurance plans overestimating what the impact would be and maybe trying to take some profits upfront before some of the changes in the Affordable Care Act occur.

Instead of lowering costs, insurance premiums increased at triple the rate from the previous year.  Why?  Thanks to new federal mandates, actual costs will increase for insurers, who now cannot offer lower-coverage and lower-cost plans to people who don’t need so-called Cadillac plans for their current situations.  Adding mandates increases costs, especially the mandates to provide coverage for pre-existing conditions and “community pricing” that requires everyone else to pay more to cover that risk.  Anyone with a modicum of knowledge about risk-pool behavior — or just plain common sense — could see that outcome two years ago.

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