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Report: Insurance premium hikes largely mirror healthcare spending

Inpatient, outpatient hospital spending drives premium growth

Health insurance premium increases are primarily driven by inpatient and outpatient hospital spending, according to a new analysis.

Overall, premiums for 2016 will increase an average of $25.26 per month, with $5.44 of that increase caused by outpatient hospital services, according to the analysis from strategic advisory company Avalere Health.

In its analysis, Avalere looked at the medical part of premium increases, comparing the portion of the increase justifications for each benefit category--such as inpatient hospital, outpatient hospital, professional services and prescription drugs--in 2016 to actual spending reported in the same markets for 2014, the most recent year with complete data.

The analysis found that causes of premium increases in 2016 generally mirror changes in healthcare spending in the individual and small group market. Inpatient and outpatient hospital spending are the biggest factor "modestly driving" those increases, since those expenses slightly outpace their share of overall costs, according to the report. Physician and other professional services make up less than their expected portion of premium growth.

While drug coverage was once less than 10 percent of the total expenditure for all cost of care, it rose to 13 percent by 2010, and is now 17 percent. But for 2016, Avalere found the portion of rate increases attributable to prescription drugs was roughly in line with drugs as a share of total spending (17 percent versus 17.5 percent).

"Plans always focus on all of their input costs, and hospital and physician spending are the largest categories," Caroline Pearson, senior vice president at Avalere, said in the analysis. "The data on premium increases for 2016 do not indicate that prescription drugs are having an outsized impact on premiums."

Last month, the government said the average premium for "benchmark" Affordable Care Act health plans will rise an average of 7.5 percent in 2016.

To learn more:
- read the analysis

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