Minnesota Health Insurance Premiums, Spending Grew Faster In 2006

Private health insurance premiums in Minnesota grew by 7.2 percent per enrollee in 2006, up from 4.5 percent in 2005, according to a new report by the Health Economics Program at the Minnesota Department of Health (MDH). Growth in health plans ,, expenses per enrollee increased from 7.2 percent in 2005 to 8.9 percent in 2006, while enrollees ,, average out-of-pocket cost grew by 15 percent.

As premiums have risen, many people have shifted to health insurance plans that require higher enrollee cost sharing. This trend continued in 2006, with enrollees ,, share of costs rising to $562 per person (compared to $489 in 2005). Enrollees ,, average out-of-pocket cost as a share of total spending was just over 14 percent in 2006, up from about 10 percent in 2000.

The report ,, s finding of faster growth in health insurance premiums and underlying costs in 2006 represents a reversal of several years of moderation in the growth of both premiums and spending. In addition, 2006 growth in private health insurance spending per person was two to three times faster than growth in Minnesota ,, s per capita income and wages, and over 5.5 times higher than the rate of inflation.

"This report provides yet another indication that serious attention to containing health care costs is needed, said MDH Assistant Commissioner Scott Leitz. "Costs continue to grow at an unsustainable rate, with the result that more and more people may become unable to afford health insurance coverage. The Governor ,, s Health Care Transformation Task Force has been charged with creating a plan to reduce Minnesota health care spending by 20 percent by 2011, to restrain the rate of spending growth, and to achieve health insurance coverage for all Minnesotans. The task force ,, s recommendations will be presented to the Legislature in February 2008.

The report also examines the changes in health care spending by type of service, finding that nearly 90 percent of spending growth from 2004 to 2006 was attributable to growth in physician, hospital, and outpatient services. In contrast to previous years, prescription drug spending per enrollee declined during this period, and health plan administrative spending was flat.