Insurer markups only a small part of premium increases
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Illustration: Brendan Lynch/Axios
A new tool visualizes how much premium revenue health insurers keep to cover overhead and, spoiler alert, it's not very much — an average of 15% in 2024.
Why it matters: Just cracking down on insurer overhead won't meaningfully bring down premiums. Making coverage affordable requires lowering health costs.
What they found: The average premium for private health insurance — including individual and employer plans — grew 78% between 2011 and 2024, according to the new tool from Yale's Health Care Affordability Lab, provided first to Axios.
- That's twice the rate of inflation over the same time period.
- In dollar amounts, premiums grew from an average of $4,008 a year to $7,151.
Between the lines: The growth in premiums has closely tracked with the rise in insurers' spending on medical claims, and the insurer markup as a percentage of the average premium cost actually decreased from 19% to 15%.
- But because premiums have increased so much, the value of that markup has jumped by several hundred dollars, from $629 to $928.
- It's difficult to determine whether that dollar increase is justified, because it's unclear what exactly is baked into the markups, said Zack Cooper, the director of the Health Care Affordability Lab.
- There's an argument that insurers are disincentivized to control costs when their profits increase as costs increase.
The big picture: Health insurers have become a political boogeyman recently, both because of affordability concerns and patients' frustrations with claims denials or prior authorizations.
- But as this data shows, "going after health insurers" without addressing underlying health care costs can at most knock premiums down by a few percentage points.
The bottom line: There's huge variation between markets, and premiums have risen most in the individual market, as opposed to the small and large employer markets.
- There's also variation from state to state.
