Center for American Progress Action

A Healthy Plan to CAP Family Spending on Insurance Premiums Enters National Debate
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A Healthy Plan to CAP Family Spending on Insurance Premiums Enters National Debate

CAP’s proposal to cap family spending on insurance premiums to reduce health care costs enters national debate.

The Center for American Progress Action Fund is delighted to see that one of our sister organization’s signature proposals to reform the national health care system is now part and parcel of the national debate. The Center for American Progress’s proposal, put forward in 2005, recommended that we limit family spending on health insurance premiums to 5 percent to 7.5 percent of a family’s income.

In an interview earlier this week with The New York Times, presidential candidate Sen. Hillary Rodham Clinton (D-NY) proposed a universal health care plan limiting the amount Americans would pay for health insurance to no more than 10 percent of their income. She would like to cap health insurance premiums at 5 percent to 10 percent of income for families.

To keep families’ costs under control, the Center’s plan would ensure that the amount families are spending on premiums does not exceed a certain percentage of their income. The balance would be covered through a refundable tax credit to keep families’ contributions at the set percentage of income.

Since 2001, premiums for employer-sponsored coverage have increased 78 percent, according to the Kaiser Family Foundation, and in 2007 those premiums averaged $12,106. Coverage is less affordable and accessible in the individual market. According to a Commonwealth Fund report, almost 90 percent of working-age adults who seek insurance in this market never buy a plan, many don’t because they can’t find affordable coverage.

Additional trends in health care premiums suggest that a cap on family spending on premiums is needed. Health insurance premiums are increasing faster than wages by a rate of 6.1 percent to 3.7 percent, respectively. The average monthly contribution for premiums by workers has more than doubled since 1999, even though the percentage of the premium paid by workers has stayed relatively constant..

These indicators point to substantial increases in health care costs for workers. High health care costs also affect wages because employers end up paying more for health care and benefits and have less money for pay increases. In some cases, workers are asked to choose between wage increases or health benefits.

Controlling families’ health care costs is critical to improving living standards and wages for working Americans. The introduction of such ideas into the national health care policy debate offers hope for all Americans to have access to the quality health care they deserve.

For more information on this issue, please see the Center’s plan: