Growth in healthcare spending, not insurer profit margins, drove the vast majority of commercial premium increases over more than a decade, according to a study published Sept. 4 in JAMA Health Forum.
Researchers at Yale University and the University of Wisconsin-Madison analyzed CMS data from 2011 to 2024 covering the large group, small group and individual markets, which included information on premiums, health spending and insurer markups for each state and year. The data did not include self-insured employers, which cover roughly half the U.S. population.
Five key findings:
- Ninety-one percent of the increase in health insurance premiums from 2011 to 2024 was explained by growth in underlying healthcare spending.
- Mean insurance premiums across all three market segments grew by $3,143, or 78.4%, from 2011 to 2024. Health spending grew by $2,844, or 84.2%, during the same period. If premiums had tracked general inflation during that timeframe, they would have grown by only $1,582, or 39.5%.
- Insurer markups, which the study defined as the combined total of profits and administrative costs, declined as a share of premiums. In 2011, markups represented 18.6% of premiums. By 2024, that figure had fallen to 14.9%. In dollar terms, markups did grow by $299, or 47.6%, but they accounted for a shrinking slice of what consumers and employers were paying.
- Mean premiums per person stood at $7,151 in 2024, but the state-level variation was significant. Massachusetts had the lowest average premiums at $5,603, while Alaska had the highest at $11,438. Premium growth from 2011 to 2024 ranged from 10.9% in Massachusetts to 163.8% in Mississippi.
- Insurer markups also varied widely by state. The national average was $936 per enrollee, or about 12.8% of premiums. Arkansas had the lowest median markup at $90, compared to $1,678 in Alaska.
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