Wednesday, February 22, 2012

Federal Data: Health Insurance Premium Growth Has Slowed After Romneycare

In 2010, John F. Cogan, R. Glenn Hubbard, and Daniel P. Kessler published in Forum for Health Economics & Policy a report (“The Effect of Massachusetts’ Health Reform on Employer-Sponsored Insurance Premiums”) on the effects of Governor Mitt Romney's 2006 health-care reform in Massachusetts.  This report suggested that, up until 2008, these reforms (hereafter referred to as "Romneycare") led to a relative increase in health-insurance premiums.  This report was cited numerous times by opponents of Romney and helped fuel the belief that Romneycare caused health-insurance premiums to skyrocket in Massachusetts (even though Cogan et al. did not make this claim).

However, new data has now come out (covering through 2010), and this data tells a rather different story.  It instead suggests that Massachusetts's health-insurance premium growth declined relative to the nation as a whole in the years since Romneycare has been enacted.  From 2006 to 2010, employer-sponsored health-care premiums for a family rose about 19% in Massachusetts, while they rose about 22% in the US as a whole.  Compare that to the period between 2002 and 2006, when Bay State family premiums increased 40% and US family premiums rose only 34.5%.  Family premiums have seen the greatest reduction in growth since Romneycare; individual premiums have also slowed their rate of growth, though by not as much.  For both family and individual premiums, the rate of growth fell below the national average in the period between 2008 and 2010.

The analysis below will look at the growth of employer-sponsored health-insurance premiums for families and for individuals prior to 2006 and after 2006.  It will also look at the difference in growth rates for health-insurance premiums for businesses in the small group market (those with under 50 employees) and with businesses with more than 50 employees.  The numbers shown are average premiums for families and individuals.  I use the same source as the Cogan study mentioned above, the federally sponsored Medical Expenditure Panel Survey.  (I also borrow some of my methodology from the Cogan study as well.)

Looking at employer-sponsored health-insurance premiums is a helpful lens for looking at the effects of Romneycare on the insurance market.  According to the Bureau of Labor Statistics and the Census Bureau, 69% of Massachusetts residents under 65 were covered by employment-based health insurance in 2010.  Nationally, a little over 58% of US residents under 65 were covered by employment-based insurance.  So a significant portion of the Massachusetts insurance market is connected to employment.

I.  Family Premiums v. Individual Premiums in Massachusetts

The following tables show the percentage growth in average family and individual premiums for the United States as a whole and Massachusetts during two periods: 2006 to 2010 (the four years after Romneycare) and 2002 to 2006 (the four years before it).  Looking at the years prior to Romneycare's passage will give some sense of the overall growth rate of Massachusetts premiums before reform was enacted.  Situating Massachusetts's growth numbers in the greater context of time and national trends will help evaluate the arc of the state's premium growth after Romneycare.  For each period, I give the raw difference in percentage growth between Massachusetts premiums and those of the nation as a whole.  A positive difference means that Massachusetts premiums are growing more quickly than those of the nation as a whole; a negative difference means that they are growing more slowly.

These charts also provide a raw differential for the differences between those two periods (arrived at by subtracting the 2010-2006 difference from the 2006-2002 difference).  Under the circumstances explored in the present analysis, a positive differential suggests that Massachusetts premiums after the passage of Romneycare curved even more upwards relative to the nation as a whole; a negative differential suggests that, after the Massachusetts health-care reform, the rate of premium growth slowed relative to the nation as a whole.


A. Average Family Premiums


2006-2010 2002-2006
US Premium % Growth 21.9% 34.5%
MA Premium % Growth 18.8% 40.0%
Difference in Growth (MA-US) -3.1% 5.5%



MA/US Differential 06-10 v 02-06 -8.6%
Source: Medical Expenditure Panel Survey, Insurance Component Table II.D1, 2002-2010

B.  Average Individual Premiums


2006-2010 2002-2006
US Premium % Growth 20.0% 29.1%
MA Premium % Growth 21.7% 32.7%
Difference in Growth (MA-US) 1.7% 3.6%



MA/US Differential 06-10 v 02-06 -1.9%
Source: Medical Expenditure Panel Survey, Insurance Component Table II.C1, 2002-2010


Looking at the raw differences and differentials does not entirely reveal the precise magnitude of the change in premium increases for Massachusetts, so here's another chart showing the percentage premium increase in Massachusetts as a percentage of the US percentage premium increase.  The US percentage increase is equal to 100%.  So, for the 2002-2006 period, family premiums in Massachusetts grew 40%, while they grew 34.5% in the US; this would be represented as 116% in the chart below, as 40% is 116% of 34.5%.

C.  Premium growth compared to US Growth (US Growth =100%)

2002-2006 2006-10
MA Family Premiums 116.0% 85.8%
Ma Individual Premium 112.1% 108.7%


This data suggests that family plans in the Bay State have witnessed the largest decline in growth.  Situating Massachusetts within a broader, state-to-state context makes this decline in premium growth even more striking.  By 2010, Massachusetts had the third-lowest average family premiums in New England (Vermont had the lowest, and Maine's family premium was $30 less than Massachusetts's) and had lower average family premiums than a number of other states in other regions, including New York, Illinois, Delaware, and Florida.  Often held up as an example of a successful "red state" model on health-care as well as other issues, Texas has been less successful at slowing the growth of premiums than Massachusetts.  The gap between these two states has shrunk since Romneycare has been enacted.  The average family premium in Massachusetts was about $600 more than the average family premium in Texas in 2006 ($12,290 vs. $11,690).  In 2010, the difference between average family premiums had declined to less than $100 ($14,606 vs. $14,526).

Health-insurance premium growth did not slow as much for individuals as it did for family plans.  However, it still did slow in absolute terms and relative to the nation as a whole.  By the the 2008-2010 period, the individual premium in Massachusetts grew about 5% slower than it did for the US (Bay State premiums grew 11.9% while US premiums grew 12.6%), so the gap between the two premium growth rates did narrow over the period.

It is also perhaps worth comparing not the magnitude of health-insurance premium growth but the size of premiums themselves for the US and Massachusetts.  Below are two charts comparing US and Massachusetts average premiums for family and individual employer-sponsored health insurance plans.  Listed is the average Massachusetts premium, the average US premium, and the Massachusetts premium as a percentage of the US premium (a percentage over 100% means that the Massachusetts premium is larger than the US premium).

D.  Average Family Premiums (in US $)




US  MA MA as % of US

2010 13871 14606 105.3%

2009 13027 14723 113%

2008 12298 13788 112.1%

2006 11381 12290 108%

2005 10728 11435 106.6%

2004 10006 10559 105.5%

2003 9249 9867 106.7%

Source: Medical Expenditure Panel Survey, Insurance Component Table II.D1, 2002-2010





E.  Average Individual Premiums (in US $)

US MA MA as % of US
2010 4940 5413 109.6%
2009 4669 5268 112.8%
2008 4386 4836 110.3%
2006 4118 4448 108%
2005 3991 4235 106.1%
2004 3705 4141 111.8%
2003 3481 3496 100.4%




Source: Medical Expenditure Panel Survey, Insurance Component Table II.C1, 2002-2010


In 2010, the average family premium in Massachusetts was closer to the national average after the passage of Romneycare than it was the year Romneycare was enacted.  Indeed, the average family premium actually declined in Massachusetts from 2009 to 2010.  The average individual premium grew a little bit relative to the nation as a whole from 2006 to 2010.  However, this premium had been relatively even larger in the past (in 2004, for example).  It will be interesting to see whether 2011 continued the downward trajectory in individual premium growth hinted at in 2010. 


II.  The Effects of Reform on Premiums for Small and Big Businesses in Massachusetts

The effects of Romney's reforms on small businesses remain a topic of considerable concern.  In order to explore these effects, I have taken a look at the rates of premium growth for companies with fewer than 50 employees (the small group market) and for companies with more than 50 employees.  The tables below, organized according to principles similar to those of the first two tables of this article, compare the growth rates for average health insurance premiums for small and big businesses in Massachusetts and the US.

F. Family Premiums--Small Businesses

2006-2010 2002-2006
US Premium % Growth 18.7% 30.5%
MA Premium % Growth 23.2% 26.0%
Difference in Growth (MA-US) 4.5% -4.5%






MA/US Differential 06-10 v 02-06 9.0%
Source: Medical Expenditure Panel Survey, Insurance Component Table II.D1, 2002-2010

G.  Family Premiums--Businesses with over 50 Employees

2006-2010 2002-2006
US Premium % Growth 22.4% 35.2%
MA Premium % Growth 17.8% 43.1%
Difference in Growth (MA-US) -4.6% 7.9%



MA/US Differential 06-10 v 02-06 -12.50%
Source: Medical Expenditure Panel Survey, Insurance Component Table II.D1, 2002-2010

H.  Individual Premiums--Small Businesses

2006-2010 2002-2006
US Premium % Growth 16.3% 26.2%
MA Premium % Growth 14.7% 32.6%
Difference in Growth (MA-US) -1.6% 6.4%



MA/US Differential 06-10 v 02-06 -8.00%
Source: Medical Expenditure Panel Survey, Insurance Component Table II.C1, 2002-2010

I.  Individual Premiums--Businesses with over 50 Employees

2006-2010 2002-2006
US Premium % Growth 21.0% 30.1%
MA Premium % Growth 23.4% 33.1%
Difference in Growth (MA-US) 2.4% 3.0%



MA/US Differential 06-10 v 02-06 -0.60%
Source: Medical Expenditure Panel Survey, Insurance Component Table II.C1, 2002-2010


There is an interesting difference in the growth rates of individual and family premiums for businesses with fewer than 50 employees and for those with more than 50 employees.  For businesses with fewer than 50 employees, family premiums have increased at a faster rate relative to the nation as a whole since the passage of Romneycare, but single premiums have increased at a slower rate relative to the national average.  Something like the converse occurs for businesses with more than 50 employees: family premium growth has declined relative to the nation as a whole, and single rate increases have correspondingly slowed compared to the nation as a whole but not as much as small-business single employee rates did.  These numbers complicate any attempt to weigh the effects of Romneycare on small businesses insurance premiums.



III.  2010 Rate Dispute: Potential Implications
There is a potential fly in the ointment of this analysis: in April 2010, the state insurance commissioner vetoed numerous rate increases for the small-group market proposed by a number of major Massachusetts health-insurance plans.  At first, the insurance companies sued to overrule this action.  Then various insurers settled with the Commonwealth to put some rate increases in place.  This legal difficulty does not, however, seem to fully explain why the average family premium actually declined in 2010; since rate hikes were approved, the average premium could easily have risen.

Furthermore, the family small group market witnessed some of the biggest rate increases in the years 2006-2010, so a decline in average premium growth was due to declining growth for premiums for larger employers (i.e., those employers mostly immune to the commissioner's ruling), which suggests that we should not overestimate the effects of this ruling on health-care premiums.  Between 2006 and 2010, the family premium for small group employers in Massachusetts increased faster than it did for the nation as a whole, rising 23.2% while US premiums grew 18.7%.  For employers with over 50 workers, health insurance premiums for a family plan grew slower than they did for US, increasing 17.8% while the national average climbed 22.4%.  Furthermore small group family rates grew 6.5% in 2010 even as larger employer rates shrunk 2.6%.  This dispute may have had some effect on the rate of insurance premiums growth, but it should not be overestimated.

Moreover, many health-insurance groups posted considerable surpluses in Massachusetts in 2010 (Massachusetts health insurance is dominated by non-profits, so "surpluses" are often used instead of "profits").  Three of the four biggest health insurers in Massachusetts (Harvard Pilgrim, Blue Cross/Blue Shield, and Tufts) had surpluses in 2010.  The major Massachusetts-based insurer which lost money (Fallon Community Health Plan) had a smaller loss in 2010 than it did in 2009; in fact, 2009 was a worse year for Massachusetts insurer finances than 2010 was.  So it is hard to say that the rate dispute pushed these plans to the brink of bankruptcy.  For at least the first half of 2011, health insurance companies in Massachusetts were also posting big surpluses, in part because of slowing health-care costs.



IV.  Conclusions and Comments
Obviously, the picture painted by this data is partial.  Health-care costs paid by the consumer are not limited to health insurance premiums.  However, it is perhaps worth noting that, in 2010, various other medical fees in Massachusetts (such as copays for visits to the doctor, deductibles, and coinsurance rates payable by consumers) were lower in Massachusetts than in the nation as a whole.  Moreover, it would also be worthwhile to compare the per capita GDP of Massachusetts residents to health-insurance premiums.  The Bay State has a relatively high per capita GDP, so it would be interesting to explore the change in premiums as a percentage of personal income over time.  Taking into account these details may find a further reduction in health-care cost growth in Massachusetts compared to the US.  As an additional point, looking at average premiums does not tell the whole story of premium growth in a state: looking at the growth of premiums at the low, middle, and high ends of health insurance plans would further reveal some of the implications of Romneycare for health insurance premiums.

This study is more an exercise in correlation rather than causation: it has not conclusively proved that Romneycare caused health-care premiums to slow their rate of growth in Massachusetts.  But it does trouble the common claim that Romneycare uniquely caused premiums to skyrocket in Massachusetts.  Instead, the four-year period after the passage of Romneycare witnessed slower growth than the four-year period before it---both in absolute terms and compared to the nation as a whole.  In the period after 2006, premium growth for families fell below the growth rate for the national average, and the growth rate for individual premiums grew closer to the national average's growth rate.  By the 2008-2010 period, both growth rates fell below the national average.  This trend may not continue, but that is the current trend.

One of the premises of Romneycare was that universal insurance through government mandates and insurance subsidies to the poor would lead to slower growth rates in medical spending and insurance premiums.  The spending growth rate on medical care seems to have declined in Massachusetts, and premium growth has either stayed the same or fallen relative to the national average.  These trends alone do not make Romneycare a success, but they also suggest that health-insurance premium increases may not be a sufficient cause for declaring it a failure.

14 comments:

  1. The above seems to say that you did the corelation and analysis yourself based on raw data from the Expenditure Panel? I am not sure that is the case because it is not clear but I think that's what you're saying.

    If that is the case, I suggest you have a problem with both your source data and some of your analytical premises and devices. A better source would be the Massachusetts Department of Healthcare Finance and Policy (DHCFP) web site which essentially depends on a census of policies rather than a survey of them. In particular look at the May 2011 Premium Trends report for better analytical premises related to Massachusetts' "merged market" ratings system, very important adjustments for the reduced benefits we have suffered here in Massachusetts since 2006, the effect of the introduction of the Young Adult Plan, the introduction of exchanges as a means by which small employers can facilitate insuring their employees, and the effects of the "merged market" itself (which happened coincidentally with RomneyCare, which is actually called Commonwealth Care).

    In addition, if the Expenditure Panel is a measurement of 'private' spending, that alone could explain the difference between your analysis and conclusions and the state's own (and everyone else's) conclusions that premiums have skyrocketed when adjusted as described above for what is actually happening here. A private spending estimate would not capture the billions of dollars shifted from private to public by federal and state subsidies of Commonwealth Care.

    Unfortunately DHCFP has not published 2010 data yet and you will probably not be able to correct for all the variables that the state has appropriately corrected for in its own analysis. But the state itself has what i calls private premiums going up over 7% a year since RomneyCare or 50% faster than you estimate. Remember, this report is done by Democratic politicians who -- like you apparently -- desperately want to 'prove' that its then latest attempt at 'reform' worked.

    It is also important to note that the 2006 changes in Massachusetts law were the fourth major 'reform' since 1988, that there have been two major 'reforms' since 2006 and that another 'reform' is in the works for this year. Wouldn't you think that if the 2006 reform was the success you apparently believe it is, that the Democrats would stop re-reforming it?

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    1. Anytime you start a major program overall, you are going to have to make additional adjustments over time as you see the effects. Some things are going to work, some aren't and if you don't make adjustments, you will sink.

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  2. This comment has been removed by a blog administrator.

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  3. Insurance companies ran up prices before Romneycare was passed both in anticipation of and to help push for mandated individual insurance purchase.

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  4. You don't think that the insurance corporations would expect us to check this data? This is CRITICAL for them, they absolutely want everyone forced into the insurance market. That would mean many more roughly 45 million more people must buy insurance plans, roughly 15% more insurance plans and therefore increased profit for the industry as a whole.

    If I were an owner of such a corporation, I would intentionally offer lower rates to Mass. residents and increase those in other states - this would give evidence to say it will work, and guarantee the poor suckers get forced into the insurance market. I would tell my competition to do the same, for mutual benefit. After they're all forced to buy into insurance plans, I can do as I like. If rates get set by congress, it won't matter. We can all go lobby congress to raise the rates if we have to, even paying some "yes men" experts to support it.

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  7. Family premiums have seen the greatest reduction in growth since Romneycare; individual premiums have also slowed their rate of growth, though by not as much. interesting

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