The States With the Most Expensive Health Insurance

The rise in premiums has slowed, but low-income workers are disproportionately burdened.
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Starpix,Dave Allocca/AP

Despite all the hubbub over Obamacare's exchange enrollment numbers this week, most people still get health insurance through work. And much of what determines how we feel about our work insurance is the cost of the premium.

With that in mind, a report out today from ADP, an employee benefits company, offers some bad news and some good news. And then some bad news again. Because, you know, insurance.

First, the bad: Insurance premiums are indeed rising—they grew 15 percent on average between 2010 and 2014.

The good news is that the rate of increase seems to have slowed. "The largest percentage increase was between 2010 and 2011, when premiums spiked 6.9 percent. In the last year, they rose 1.7 percent," they wrote.

The average monthly premium is now $870 for each employee, though that includes both the part the employer pays for and the part the employee covers. 

And then, another downer: The reason for the slowdown is not because insurance is getting less expensive, but because employers are switching to stingier plans with higher deductibles and co-pays. 

One of the most intriguing aspects to this is that there's a lot of state-by-state variation. Some states have much lower premiums than others, and some have seen less growth in the cost of premiums.

Here's the chart, from ADP:

ADP

You can see here that some states, like New Jersey, have very high premiums, but they're not rising by much. Meanwhile, places like Washington and California have relatively inexpensive insurance, but the cost is increasing rapidly.

Christopher Ryan, one of the report authors and ADP's vice president of strategic advisory services, said there's not any one reason behind the trends in the above graph. Premiums are a product of everything from the cost of living in the state, to the demographic composition of its workers, to state laws on mandatory insurance benefits.  

"There are some states that have populations that are younger and healthier, and they consume less healthcare. There are some states that have larger family sizes, so you may have more dependents that you’re covering," he said. "Some states mandate dental coverage for children. There are some states where higher costs are associated with higher costs of living, and also with urban populations."

Having a large uninsured population, too, can drive up premiums, since uncovered ER visits tend to make hospital care more expensive.

There are also state-by-state differences in how much employers are willing to chip in to cover the cost of premiums:

ADP

It's hard to read the tea leaves on this one, too, but Ryan said it has a bit to do with the type of industry that's most prevalent in each state. High-tech companies, like, say, Microsoft in Washington, tend to subsidize insurance coverage more generously as a way of attracting and retaining hard-to-find talent. Nationally, employers are contributing about .5 to 1.5 percent less to their share of the premiums than they were in 2010.

Another unsettling trend is that insurance premiums are taking up an increasingly large percentage of peoples' wages, and low-income workers are hit the hardest. While employees who made more than $120,000 a year only paid 2.3 percent of their income in premiums in 2014, those who make between $15,000 and $20,000 forked over almost a tenth of their salaries.

"Because health plan premiums grew more quickly than wages, premium contributions as a percentage of income increased more rapidly for lower-wage employees," the report authors write.

ADP has been tracking the insurance coverage among a set of large employers (those with roughly 1,000 employees each) for five years. The employers in the study are self-insured, meaning they directly cover the health costs of their employees.

"There is no question that a number of employers are looking for new strategies to improve the health of employees while keeping premiums down," Ryan said. "They're looking to things like high-deductible plans, health promotion programs, and new employee tools so they can be smarter shoppers when they go out and buy healthcare."

Given the high cost of premiums, though, healthcare seems to be eating up a substantial chunk of workers' paychecks before they set foot in the doctor's office.
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Olga Khazan is a staff writer at The Atlantic, where she covers health.

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