About Annual Health Insurance Premiums

Health insurance coverage provides a means for individuals and families to afford costs associated with health care. Individuals with employer-sponsored plans typically have their premiums deducted from their payroll checks while those with individual insurance pay according to a scheduled timetable. When the cost of health care goes up, annual health insurance premium amounts can rise accordingly.

Affordability

• Employer-sponsored health coverage and individual coverage make up the two basic types of health insurance. Employer-sponsored plans, or group plans, typically cost less than individual coverage because insurance carriers can spread the risk across a large group of participants under group plans. According to American Medical News, the continuous rise in annual health insurance premiums makes employer-sponsored coverage less affordable for employers to offer and less affordable for individuals and families overall. These increases are even less affordable for small businesses that employ less than 200 workers.

Trends

• According to American Medical News, annual health insurance premiums saw a 6.1 percent increase in 2007, while inflation rose an average of 2.6 percent and cost of living rose 3.7 percent. In order to compensate for the increase, employers may resort to passing some of this cost on to employees in the form of higher premium payments. According to a September 2009 USA Today article, in a survey conducted by the Kaiser Family Foundation, health insurance premiums for families rose as much as 131 percent between 1999 and 2009 while inflation rates only saw a 28 percent increase during the same time period.

Contribution Percentages

• In 2009, the average cost of an employer-sponsored family plan ran $13,375, according to USA Today. On average, plan participants paid 27 percent of the annual cost, which has remained steady since 2005. When compared to annual premium payments made in 1999, employee contributions have more than doubled with an average annual premium costing $3,515 in 2009, according to the Kaiser Family Foundation. Increases in premium payments result from higher health insurance costs and smaller employer contributions into sponsored plans.

Company Size Comparisons

• Differences in premium costs can vary depending on company size and the type of health plan. According to the Kaiser Family Foundation, annual health insurance premiums for individual coverage in 2009 in companies with less than 200 employees averaged about $625 compared with the $854 paid by workers in companies with 200 or more employees. Annual health insurance premiums for family coverage saw a reverse effect, with employees in small companies paying an average of $4,024 compared to the $3,182 paid by employees in large firms. These differences between single and family coverage result from the contribution amounts provided by each respective employer and whether a particular plan provides partial or full cost coverage.

Self-Insured Premiums

• Annual health insurance premiums for people who purchase non-group, or self-insured plans can vary in cost depending on age and type of policy. A survey by the Kaiser Family Foundation in March 2010 showed annual premiums for individual coverage averaged about $3,606, while family coverage averaged out at $7,102. Older individuals who don't yet qualify for Medicare reported paying higher annual premiums for both individual and family coverage. On top of the annual premium cost, participants in self-insured plans reported paying an average $1,690 in out-of-pocket costs. Overall, health insurance rates for self-insured plans saw a 20 percent increase since 2009 according to the Kaiser Family Foundation.