A big mahalo to State Insurance Commissioner Gordon Ito for his December 8, 2017 presentation concerning health insurance costs in Hawaii.
With health care costs in Hawaii rising an average of 7% to 9% every year, premiums are anticipated to double every 10 years. As the price of premiums increases, we have historically spent increasingly more on premiums as a percentage of our wages. In 1974, when Hawaii’s Prepaid Health Care Act was passed, medical and drug premiums cost 2.8% of the average income in Hawaii. In 2015, however, medical and drug premiums cost 14.7% of the average income in Hawaii.
What will be the price of premiums in the future? This answer depends on the rate of increase of the premiums. In 2026, if the small group health insurance premium increases at an 8% rate, an individual’s annual premiums will be $16,294.53. If the premium increase can be lowered to 6.5%, the projected individual annual premium is $14,167.73 and the family annual premium is $42,503.20. Bending the cost curve further down to 3.5% would reduce the individual annual premium to $10,646.52 and the family annual premium to $31,939.57.
Factors contributing to the skyrocketing healthcare costs include:
- Physician, facility and pharmaceutical cost
- Expensive technologies and procedures
- Fragmented and uncoordinated care
- Lack of cost consideration from patients
- Fee-for-service
- High administrative cost expenses
- Unhealthy behavior and lifestyle choices
- Expensive end-of-life care
- Provider consolidation
- Aging population
In order to slow the health insurance inflation rate, Commissioner Ito encourages employers to adopt wellness programs that support a healthier lifestyle with a focus on preventive care. He hopes that we, as a community, can reduce the health insurance inflation rate to 3.5%, an amount that is sustainable in his opinion. Without collective changes from employers, individuals, and health insurers, health insurance premiums may be astronomically high and the Prepaid Health Care Act could be in jeopardy in less than two decades.