Premiums Outpace Costs, Study Finds

April 9, 2003
Recent increases in health insurance premiums have exceeded the growth in health care costs, according to a report released by the American Hospital Association and the Federation of American Hospitals.

The report looks at the pattern of yearly gains and losses in the private health insurance industry -- known as the underwriting cycle -- and its impact on health plan premiums and profitability.

"As the underwriting cycle approaches another high point, we see improved profitability of plans as premium growth is not only a reflection of rising health care costs, but also reflects the current stage of the underwriting cycle," the study prepared by Milliman USA said.

The report indicates that factors related to the underwriting cycle, such as health plan profitability targets and reduced competition due to consolidation in the insurance industry, contribute to health plan premium increases.

At a joint press conference releasing the study, AHA Executive Vice President Rick Pollack said, "We've all seen many parts of the health care spending picture: health care labor costs are increasing, new and expensive technology is in demand, and more Americans are using more hospital services. Today's report completes the picture by demonstrating that the insurance underwriting cycle is an important factor as well."

The report and the two earlier health care cost studies can be found at www.aha.org by clicking on "Cost of Caring reports."