Summarizing Utah's Comprehensive Health Insurance Market & Coverage

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 comprehensive 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.

During 1999 to 2007, the number of Utah residents covered by comprehensive health insurance has seen period of decline followed by periods of increase. Comprehensive health insurance membership declined the most from 1999 to 2003, and then remained fairly consistent during 2004, and then increased from 2005 to 2007. Based on the available information, the decline during 1999 to 2003 appears to be primarily due to a shift by large employers and other large group plans from commercial insurance to self-funding arrangements. However, recent increases in the uninsured and the number of residents covered by government sponsored health benefit plans may also be contributing factors.

During 2005 to 2007, comprehensive health insurers reported an increase in membership with most of this increase occurred during 2006. However, another significant increase occurred during 2007, with comprehensive health insurers reporting an increase of over 33,000 members, an increase of 3.9 percent. Most of the increase occurred among large group plans, with the remainder occurring among small group plans. Individual plans reported a slight decrease. As for plan types, increases were reported among every plan type except Health Maintenance Organization plans, which experienced a significant decline. This was due in part to a one-time restructuring of the market place. This restructuring has two components. First, nearly half of the increase was due to two new foreign insurers entering Utah's comprehensive health insurance market and acquiring new members, with most of the remaining increase occurring among the top three domestic insurers. Second, one of Utah's large domestic insurers, in response to market demands for products with more open provider networks, shifted a large block of business from Health Maintenance Organization plans (which have a more limited provider network) to Health Maintenance Organization with Point of Service features plans (which provide the option to use non-network providers but at a higher cost). This shift from Health Maintenance Organization plans to Health Maintenance Organization with Point of Service features plans appears to a response to market forces that were demanding insurance products with more open provider networks and the insurer responded to meet market demand. These are positive signs for the industry, particularly given the stress caused by the rising cost of health care. These changes suggest that Utah's comprehensive health insurance market is attractive and new insurers want to do business here and Utah's insurers are responsive to market forces and will change how they do business if the demand is there.

Over the last thirteen years the top insurers in the comprehensive health insurance industry have experienced an average financial gain of 1.59 percent. Comprehensive health insurers experienced significant losses from 1996 to 1998. However, company financials have improved since 1998, with the core of the industry experiencing an average financial gain of 2.58 percent over the last nine years, with financial gains of 4.34 percent during 2007. Overall, Utah's core comprehensive health insurers are financially solvent and have adequate reserves to cover health insurance claims. Utah's comprehensive health insurers are financially stable and are able to meet their financial obligations to consumers.

As requested by the Utah Legislature, the Insurance Department has developed a list of recommendations for legislative action that have the potential to improve Utah's health insurance market. These recommendations are reported in the Appendix (see page 43). This year's report also includes new data on long-term care insurance and Medicare products.

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