Rising Health Insurance Costs Hurt Maryland Workers and Small Businesses

October 7, 2015 by Mark Scott in Blog, Health, Spotlight - Health

The rising cost of health insurance is forcing many Maryland families to make tough choices between taking care of their health and meeting other basic needs. Insurance premiums have grown three times as fast as household incomes in Maryland since 2005, meaning that workers and families end up with less money to spend on housing, transportation, child care and other essentials.

Increasing health insurance costs also make it more difficult for Maryland small businesses to continue providing health coverage for their employees and expand their businesses.

Although the Affordable Care Act enHealth insurance policyabled thousands more Maryland residents get health insurance and slowed cost growth, it has not completely thwarted rising costs. Over the past year, the average cost of a family health insurance plan increased 4 percent.

Working men and women have shouldered most of the insurance price increases over the past decade. People who get their insurance through their employer pay 83 percent more now than they did in 2005. At the same time, employer spending on health insurance rose 54 percent. As of 2015, the average annual family premium in the United States is $17,545, according to the Kaiser Family Foundation.

Many Marylanders will see their insurance costs go up once again in January because the Maryland Insurance Administration recently signed off on insurance companies’ plans to increase premiums. The most egregious price hike is a 26 percent increase in monthly premiums for CareFirst plans, which cover three-fourths of people who buy insurance through the Maryland Health Connection, the state’s insurance marketplace.

Such drastic price increases are bad for families and for the state’s economy. Lawmakers should place more limits on how much insurance companies can increase premiums over a given period of time. In addition, the state should highlight and reward the efforts of insurance companies that have successfully contained costs.

Although they have passed more of the increase to their workers, employers still have the primary responsibility for paying insurance premiums. On average, employers pay 71 percent of the annual family premium, which is why small businesses often have difficulty absorbing large cost increases. Family plan premiums for small firms, which the Kaiser Family Foundation defines as having fewer than 200 workers, have increased to an average of $16,625 per employee, up from $10,587 in 2005 ($12,918 adjusted for inflation). More than half of all businesses in Maryland have fewer than 500 employees and more than one-third of all businesses in the state have fewer than 100 employees, according to the Small Business Administration.

Premium increases, combined with the weak labor market, have led employers to re-evaluate employee pay and benefits. Companies have passed new costs on to their employees by switching to lower-priced plans with fewer benefits, or increasing the employee share of premium costs.

Working Marylanders and their employers may benefit from the state’s recent rollout of the Maryland Small Business Exchange, which should help employers find more competitive insurance plans. The exchange also offers small businesses a two-year tax credit for insurance expenses and provides employees more health plan options. However, it is necessary for legislators to take further action to limit price increases.

Spending more on insurance means that working families have less to spend on other things, which reduces overall economic activity in the state and hurts businesses whose customers now have less to spend on their products and in their stores. Making insurance more affordable would have long-term benefits for the state’s economy.

 

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