ANALYSIS OF PRIVATE HEALTH-INSURANCE PREMIUM GROWTH-RATES - 1985-1992

The rate of increase in health care expenditures has been a central po licy concern for well over a decade, yet little empirical research has been conducted to examine expenditure growth rates. This study analyz ed health insurance premium growth rates for a selected sample of 95 i nsured groups over the period 1985 to 1992. During this time, premiums increased by approximately 150% in nominal terms and by 45% in real t erms. The observed rate of growth was not constant over time, however. The most rapid growth occurred during the years 1986 to 1989; thereaf ter, the rate of increase in premiums declined. Multivariate analysis was conducted to assess the effects on premium growth rates of selecte d variables representing insurance benefit design features, market com petitive factors, insurance system factors, and group-specific factors . In addition to the percentage increase in benefit payments, other fa ctors found to affect premium growth rates were health maintenance org anization market penetration, deductible level, the coinsurance rate, and state insurance mandates. Further, this analysis suggests that the insurance underwriting cycle may play an important role in influencin g insurance premium growth rates. These results support the belief tha t health maintenance organization induced competition has potential to control the rate of increase in health care costs.