2008 Utah Health Insurance Market Report Introduction

2008 Health Insurance Market Report

Executive Summary

Health insurance is an important issue for the people of Utah. Utah's residents receive their health insurance coverage through health plans sponsored by the government, employers, and commercial health insurers. The commercial health insurance market is the only source of health insurance directly regulated by the Insurance Department.

Approximately 61 percent of Utah's commercial health insurance market is comprehensive health insurance (also known as major medical). The comprehensive health insurance industry serves approximately 32 percent of Utah residents. The typical policy in this industry is an employer group policy with a managed care plan administered by a domestic commercial health insurer.

A key function of the Insurance Department is to assist consumers with questions and concerns they have about insurance coverage. The Office of Consumer Health Assistance (OCHA) is the agency within the Insurance Department that handles consumer concerns about their health insurance. Based on the number of complaints received by OCHA, most Utah consumers are receiving good consumer service from Utah's commercial health insurers. For example, the numbers of consumer complaints received by the Insurance Department declined from 1999 to 2003, remained fairly constant during 2004 and 2005, and then declined again during 2006 and 2007. This is primarily due to efforts by OCHA's staff and the Utah health insurance industry to resolve consumer concerns before they rise to the level of a formal complaint. This is a positive trend for Utah consumers and the Utah health insurance industry.

Over the last nine years, there have been four significant trends in the comprehensive health insurance market that the Insurance Department continues to monitor: changes in the number of insurers, the cost of comprehensive health insurance, the number of Utah residents with comprehensive health insurance, and the financial status of the health insurance market.

The number of comprehensive health insurers declined steadily from 1999 to 2003, and then remained fairly constant during 2004, with a slight increase during 2005 and 2006, followed by another slight decline during 2007. Most of this change was due to a decrease in the number of small foreign comprehensive health insurers participating in the comprehensive health insurance market during 1999 to 2003. In contrast, there has been little or no change in the number of medium to large comprehensive health insurers. Large domestic comprehensive health insurers account for more than 90 percent of the market and provide a solid pool of commercial health insurers. These insurers are financially solvent and provide an important level of strength, stability, and choice for Utah's comprehensive health insurance market. The decline has affected a small portion of the marketplace and the number of large commercial health insurers offering comprehensive health insurance has remained stable since 1999.

Like the rest of the United States, Utah's comprehensive health insurance market is experiencing significant increases in the costs of health insurance. For example, the average premium per member per month increased from $192 during 2006 to $204 during 2007, an increase of 6.3 percent. This growth in premiums is being driven primarily by increases in the underlying cost of health care that commercial health insurers contract to pay for. For example, the average losses per member per month increased from $157 during 2006 to $166 during 2007, an increase of 5.7 percent. Over the last nine years, increases in premium per member per month have averaged 9.2 percent per year, while increases in losses per member per month have averaged 7.8 percent per year. Overall, the data suggests that while premiums have fluctuated year to year, there is consistent pricing pressure on health care costs that has remained constant over the last nine years. These pricing pressures are not unique to Utah and are being driven by national health care trends that are affecting most states in a similar way. Although these increases are difficult, Utah's health insurance premiums appear to be lower than the national average. Based on data from the NAIC financial database, the average cost for comprehensive health insurance coverage was $259 per member per month during 2007. Although this comparison does not control for differences in benefits, health status, or demographics, this national estimate is higher than the average in Utah's commercial market. However, the premium that consumers actually pay will differ from the market average depending on their individual circumstances.

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