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AHIP follows the money: Here are the factors driving insurance premiums higher

Drug and medical costs account for close to 50% of premium prices, while profits make up 2.3%, according to AHIP research.

Susan Morse, Senior Editor

The greatest percentage of the health insurance premium dollar goes to prescription drugs, according to America's Health Insurance Plans.

Prescription drug prices and medical costs, which account for more than 45 percent of the average dollar, continue to rise, AHIP said, forcing premium increases. 

The report examined two years of data from commercial plans and from the individual market, from 2014 to 2016.

(Graphic from AHIP)

Profit accounts for only 2.3 cents of every dollar, according to AHIP. On the other hand, prescription drugs, long known to be a big payer item, account for 23.2 cents of every dollar.

Another 22.2 cents pays physicians, while 20.2 cents pays for all other costs at doctors' offices and clinics.

Hospital stays account for 16.1 cents; 4.7 cents pays federal, state, and local taxes, 1.8 cents pay for customer service operations and marketing; and 1.6 cents pays for care management, including disease management and wellness programs.

Finally, 1.6 cents pays for activities related to claims, including programs to battle fraud, waste and abuse.

"Plans use a meaningful part of premiums to make coverage more efficient and effective," said Matt Eyles, incoming president and CEO of AHIP. "But as prescription drug prices and medical costs continue to rise, it forces premiums higher for hardworking American families. Health plans work hard to negotiate lower costs and premiums for their members."

AHIP supports many of the initiatives being undertaken by Congress, the Administration and the states to improve healthcare costs and benefits, Eyles said. This includes more support for wellness services to keep people healthy.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com