Investor Presentaiton
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ver the last two decades, per person spending on health care in Rhode Island
has grown faster than the state economy and personal income, consuming a
significant and increasing proportion of household income, business revenue,
and state and municipal budgets. Since 2000, per capita health care spending in
Rhode Island has increased at an average annual rate of 4.6 percent,' compared to
an average annual growth of 2.9 percent in state gross domestic product (GDP)²
and 3.5 percent in personal income ³ Today, per person spending on health care is
2.45 times higher than it was in 2000.
High and rising health care spending has led to dramatic increases in premiums for
employer-sponsored insurance, putting a significant strain on employers and their
workers. Employer-sponsored insurance is the predominant form of insurance
coverage in the state, with half of Rhode Islanders obtaining coverage through an
employer in 20214 From 2001 to 2021, the average employer-sponsored family premium
in Rhode Island grew nearly three times, from $8,023 to $22,381 per year.5 Whether
the employer funds employee health care expenses directly on a self-insured basis (as
is common among large companies and municipal and state employee health benefit
plans) or purchases a fully insured group plan from a commercial health insurer, these
premium increases are having a significant impact on employers' costs and profitability.
Employers have responded to increased health care costs in various ways, such as
by increasing employees' premium contributions, increasing cost-sharing, reducing
employment, or limiting wage growth (see Exhibit 1.1).6.7 Data show that in Rhode
High and rising health
care spending has led
to dramatic increases in
premiums for employer-
sponsored insurance,
putting a significant
strain on employers and
their workers.
Exhibit 1.1: Effects of Higher Prices on Health Insurance Premiums and Benefits, Out-of-Pocket
Costs, and Wages
When prices paid to providers INCREASE
Commercial health insurers' spending on claims INCREASES
Plans are adjusted in ways that have ONE OR MORE of the following results...
Patients' out-of-pocket
cost INCREASE
Covered benefits
are NARROWED
Employees' premium
payments INCREASE
Employers' premium
payments INCREASE
Employees' wages
GROW MORE SLOWLY
Firms' profits DECLINE
Source: Congressional Budget Office, The Prices That Commercial Health Insurers and Medicare Pay for Hospitals' and Physicians' Services, January 20,
2022, https://www.cbo.gov/publication/57422.
1
KFF State Health Facts, Health Expenditures per Capita by State of Residence, accessed March 29, 2023,
https://www.kff.org/other/state-indicator/health-spending-per-capita/?currentTimeframe=0&sortModel=%7B%22colld%22:%22Location%22%22sort%22:%22asc%22%7D.
2 United States (US) Bureau of Economic Analysis (BEA), Gross Domestic Product: All Industry Total in Rhode Island, retrieved from Federal Reserve Economic Data (FRED), Federal Reserve Bank
of St. Louis, accessed March 27, 2023, https://fred.stlouisfed.org/series/RINGSP.
3 US BEA, Per Capita Personal Income in Rhode Island, retrieved from FRED, Federal Reserve Bank of St. Louis, accessed March 27, 2023, https://fred.stlouisfed.org/series/RIPCPI.
KFF State Health Facts, Health Insurance Coverage of the Total Population, accessed March 29, 2023, https://www.kff.org/other/state-indicator/total-population/.
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5 Agency for Healthcare Research and Quality (AHRQ), Average Total Family Premium (in Dollars) per Enrolled Employee at Private-sector Establishments that Offer Health Insurance by Total,
Rhode Island, 1996 to 2021, Medical Expenditure Panel Survey Insurance Component (MEPS-IC), accessed March 27, 2023, https://datatools.ahrq.gov/meps-ic?type=tab&tab=mepsich3ps.
6 Laurel Lucia and Ken Jacobs, Increases in Health Care Costs are Coming Out of Workers' Pockets One Way or Another: The Tradeoff Between Employer Premium Contributions and Wages, UC
Berkley Labor Center Blog, January 29, 2020, https://laborcenter.berkeley.edu/employer-premium-contributions-and-wages/.
7 Daniel Arnold and Christopher M. Whaley., RAND Corporation, 2020,
https://www.rand.org/pubs/working papers/WRA621-2.html.
Annual Report: Health Care Spending and Quality in Rhode Island
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