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Monday, 8th December 2008

New Report Shows Slower Premium Growth, But Increasing Pressure to Address Waste in Health Care System

New Report Shows Slower Premium Growth, But Increasing Pressure to Address Waste in Health Care System
Source: America's Health Insurance Plans (AHIP)

Health insurance premiums have slowed to less than half the growth rate from five years ago, yet higher costs, increased utilization and waste in the health care system continue to fuel underlying health cost increases, a new report released today finds.

Prepared by PricewaterhouseCoopers (PwC) on behalf of America's Health Insurance Plans (AHIP), "The Factors Fueling Rising Healthcare Costs 2008" examines the causes of rising health care costs and analyzes how health insurance premium dollars are being spent.

This is the third study prepared by PwC. The study found that premiums increased 6.1 percent from 2006 to 2007 as compared to 8.8 percent from 2004 to 2005 and 13.7 percent from 2000 to 2001. This is a 31 percent and 55 percent reduction respectively over the previous growth rates.
...
The growth in health insurance premiums was driven by general inflation (46 percent), health care price increases in excess of inflation (30 percent), and increased utilization of services (25 percent).

The report also found that 87 cents out of every premium dollar go directly towards paying for medical services. Embedded within the 87 cents are the costs of medical liability and defensive medicine, which are estimated to be ten cents of the premium dollar.

Of the remaining premium dollar, four cents go to consumer services such as prevention, disease management, care coordination, investments in health information technologies and health support; provider support; and marketing. Six cents go to costs associated with government payments, regulation and claims processing and other administration. Health insurance plan profits comprise three cents of the premium dollar, unchanged since the last report.

+ PricewaterhouseCoopers Cost Study 2008


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