Growth in healthcare spending, not insurer profit margins, drove the vast majority of commercial premium increases over more than a decade, according to a healthcare spending premium growth study published Sept. 4 in JAMA Health Forum.
How This Healthcare Spending Premium Growth Study Was Conducted
Researchers at Yale University and the University of Wisconsin-Madison analyzed CMS data from 2011 to 2024 covering the large group, small group and individual markets, which included information on premiums, health spending and insurer markups for each state and year. The data did not include self-insured employers, which cover roughly half the U.S. population.
Why This Data Limitation Matters
Excluding self-insured employer plans, which cover roughly half of Americans, means this study’s findings apply specifically to the fully insured commercial market rather than the broader universe of employer-sponsored coverage, a distinction worth noting when applying these findings to the overall U.S. health insurance landscape.
The Core Finding Within This Healthcare Spending Premium Growth Study
Ninety-one percent of the increase in health insurance premiums from 2011 to 2024 was explained by growth in underlying healthcare spending. Mean insurance premiums across all three market segments grew by $3,143, or 78.4%, from 2011 to 2024. Health spending grew by $2,844, or 84.2%, during the same period. If premiums had tracked general inflation during that timeframe, they would have grown by only $1,582, or 39.5%.
Why the Inflation Comparison Matters
This gap between actual premium growth (78.4%) and what general inflation alone would have produced (39.5%) illustrates just how significantly healthcare-specific cost growth, rather than broader economic inflation, has outpaced overall price increases across the economy during this 13-year period.
What Happened to Insurer Markups Within This Healthcare Spending Premium Growth Study
Insurer markups, which the study defined as the combined total of profits and administrative costs, declined as a share of premiums. In 2011, markups represented 18.6% of premiums. By 2024, that figure had fallen to 14.9%. In dollar terms, markups did grow by $299, or 47.6%, but they accounted for a shrinking slice of what consumers and employers were paying.
Why This Distinction Challenges a Common Narrative
This finding, that insurer markups grew in absolute dollar terms but shrank as a percentage of total premiums, directly counters a common public perception that rising premiums are primarily driven by growing insurer profits, instead pointing to underlying medical cost growth as the dominant factor.
State-Level Variation Within This Healthcare Spending Premium Growth Study
Mean premiums per person stood at $7,151 in 2024, but the state-level variation was significant. Massachusetts had the lowest average premiums at $5,603, while Alaska had the highest at $11,438. Premium growth from 2011 to 2024 ranged from 10.9% in Massachusetts to 163.8% in Mississippi.
Why Markup Variation Also Diverged Sharply by State
Insurer markups also varied widely by state. The national average was $936 per enrollee, or about 12.8% of premiums. Arkansas had the lowest median markup at $90, compared to $1,678 in Alaska, a nearly nineteen-fold difference that suggests state-specific market dynamics, regulatory environments, and competitive conditions play a substantial role in how much insurers add to underlying medical costs.
What This Healthcare Spending Premium Growth Study Means Going Forward
Given that healthcare spending growth, rather than insurer markups, accounts for the overwhelming majority of premium increases, policymakers and advocacy groups focused on controlling premium costs may need to prioritize addressing underlying medical cost drivers, hospital and physician pricing, drug costs, and utilization, rather than insurer profit regulation alone. Given the dramatic state-level variation in both premium growth and markup levels, from Massachusetts’s 10.9% growth to Mississippi’s 163.8%, state-specific market conditions appear to play a substantial role that national-level policy discussions may sometimes overlook.
What to Watch Going Forward
As policymakers continue debating healthcare affordability, industry observers will likely watch whether this study’s findings shift public and legislative focus toward underlying medical spending drivers rather than insurer profitability specifically. Given the stark state-by-state disparities in both premium growth and markup levels this healthcare spending premium growth study documents, states with the steepest premium increases, like Mississippi, may face renewed scrutiny over what specific cost drivers, beyond insurer behavior, are pushing their markets so far above the national average.
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