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CMS: Health Insurance Costs Rise Just 1.4%

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The amount U.S. residents spent on public and private health insurance administrative costs rose only 3.6% in 2007, down from 8.4% in 2006.

Economists and actuaries in the Office of the Actuary at the Centers for Medicare and Medicaid Services are making that prediction in a paper published in the Web edition of Health Affairs, a scientific journal that focuses on the delivery and financing of health care.

The research team, led by Micah Hartman, an economist at the CMS national health statistics group, is estimating that overall national health expenditures increased 6.1% in 2007, to $2.2 trillion, while national health expenditures per person increased 5.1%.

The annual increase in U.S. gross domestic product was 4.8%.

Total “NHE” accounted for 16.2% of GDP in 2007, up from 16% in 2006.

Spending on “program administration and net cost of private health insurance”– or health insurance premiums minus expenditures on medical claims – rose to $156 billion, from $150 billion.

Total private health insurance premiums increased 6%, to $775 billion.

The net cost of private health insurance – the difference between premiums and benefits – grew just 1.4%, the researchers report.

“Some factors that explain the slower growth trend are a reduction in small employers’ offer rates for insurance, a decline in the share of population covered by private insurance (from 68% in 2002 to 65% in 2007…), and the recent increased take-up rates of high-deductible plans …and health savings accounts,” the researchers write.

Researchers are estimating in another paper in Health Affairs that private health insurance spending increased 5.5% in 2008, to $817 billion.


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