Figure 9. Private Health Insurance Premium and Benefit Growth: Calendar Years 1993-97.

PHI benefit payouts grew faster than premiums from 1994-97, a likely precursor of future increases in premium growth.

• In 1997 PHI expenditures ($348.0 billion) accounted for just under one-third of total health care spending ($1,092 billion). In 1997 PHI premiums grew just 3.2 percent, continuing a trend of extremely low growth that began in 1994.
• Although premium growth remains very low, the proportion of PHI premiums paid out for benefit claims has been rising since 1994, squeezing the operating margins of many insurance companies. Tough bargaining by employers and the desire by insurance companies to protect or gain market share have forced insurers to keep premium price increases down for the last 4 years. However, many analysts expect that managed care enrollment saturation, the introduction of costly new drugs and technologies, and the rising demand for health care services will drive a re-acceleration of health insurance premium growth over the coming decade (Smith et al., 1998).