Premiums for family coverage increased 7.7% in 2006. While premiums continue to rise, this is the third consecutive year that premium increases were less than they were in the previous year.¹

While lower than in recent years, the 7.7% increase in the cost of coverage exceeds the overall rate of inflation by about 4 percentage points and the increase in workers’ earnings by almost 4 percentage points. Since 2000, the cost of health insurance has increased by 87%.

The average cost of family coverage is $11,480 a year.

Premium Increases

• The cost of health insurance rose 7.7% in 2006, which is lower than the 9.2% increase for 2005 but still much higher than the overall rate of inflation (3.5%) or the increase in workers’ earnings (3.8%) (Exhibit 1.1)
  
• Small firms (3-199 workers) reported a higher rate of increase (8.8% vs. 7.0%) than large firms (200 or more workers) (Exhibit 1.3).
  
• The average premium increase in the Northeast was higher than in the rest of the country (8.8% vs. 7.4%).
  
• There is variation in premium increases across workers and firms: 13% of covered workers work in firms that experienced premium increases of greater than 15%, while 42% of covered workers work in firms that experienced premium increases less than or equal to 5% (Exhibit 1.4).
  
• Across plan types, premiums for HDHP/SOs increased by 4.8%, which is significantly lower than the premium increases for HMOs (8.6%) and POS plans (8.4%) (Exhibit 1.5). The average premium increase for HDHP/SOs is not statistically different from the average increase for PPOs (7.3%), the most common plan type (Exhibit 1.2).
  
• Premium equivalents in self-funded firms rose at a lower rate than premiums in fully insured plans (6.8% vs. 8.7%) (Exhibit 1.6).

Monthly Premium Costs for Single and Family Coverage

• The average cost of premiums for single coverage in 2006 is $354 per month or $4,242 per year. This figure includes both the worker and employer contribution. The average cost of premiums for family coverage is $957 per month or $11,480 per year (Exhibit 1.10).
  
• Covered workers in PPO plans, the plan type with the highest enrollment, have higher average premiums for both single and family coverage than covered workers in HMOs, POS plans, and HDHP/SOs. Covered workers in HDHP/SOs have lower average premiums for both single and family coverage than workers in each of the other plan types (Exhibit 1.9).
  
• As with premium increases, there is also a great deal of variation in premiums across workers and firms: 10% of covered workers work in firms that have single premiums of $250 or less per month, while 22% have single premiums greater than $400 per month (Exhibit 1.13).