Slower rise in health insurance costs is an illusion

August 22, 2013
Back to TopCommentsE-mailPrintBookmark and Share

A mild debate broke out Tuesday after new data from the Kaiser Family Foundation showed health insurance premiums rose only 4 percent for families for the second year in a row.
 
Health experts couldn’t seem to agree on whether that rise, which is small by historical standards, was good or bad.
 
So let me make it easy for you: It’s bad.
 
In fact, it’s even worse than we’ve experienced over most of the past decade. That's because the increases gobbled up an even larger chunk of worker's compensation, leaving them with fewer wages to spend on everything else.
 
The increases (4 percent for families, but 5 percent for those on single-person policies) were four times faster than average hourly wages grew over the past year, according to the latest data from the U.S. Bureau of Labor Statistics.
 
Over the past nine years, the rise in health insurance premiums has been only about three times faster than wage growth. (I only went back to 2004 because that’s when the BLS made a change in its data, making comparison further back more difficult.)
 
So what do all these percentages mean in real dollars?
 
To answer that question, let’s assume that since 2004, health insurance premiums had merely risen at the same rate as overall compensation. According to BLS data, that means health insurance would have remained as merely 7.2 percent of overall compensation, as it was in the first quarter of 2004, instead of rising to 8.6 percent of total compensation, as it did in the first quarter of 2013.
 
If health insurance premiums had merely risen in line with compensation, it would have saved employers $863 per year per full-time worker on health benefits, according to BLS data. Let's employers would have passed along that money as income to employees, minus the roughly 20 percent in income-based taxes that employers would have either paid for or withheld from each worker. That means each full-time worker would be getting $691 more pear year than they are now.
 
In addition to that, each worker who enrolls in his or her employer’s health insurance would be paying about $975 less for health insurance, assuming their contributions had merely increased at the same rate as compensation.
 
That number is based on the data released by the Kaiser Family Foundation on Tuesday. I combined the rise in contributions for both family and single coverage, assuming that workers were buying family coverage at a 2-to-1 rate versus single coverage.
 
Since only 56 percent of all eligible workers at employers actually enroll in health plans, according to Kaiser's data, I figured that the across-the-board savings would be $546 per year.
 
So all told, since 2004, each full-time worker is poorer by $1,237 per year in today's dollars (in foregone raises and additional premium increases) than he or she would have been if health insurance had risen in line with overall compensation.
 
That means that health insurance premium increases have cost every worker a raise of 2.8 percent. I'd sure take that.

And premium increases are only half the story. Workers have also become more and more exposed to medical costs. This has been a deliberate strategy of employers, for various reasons. But the average deductible on health plans has risen from $584 in 2006 to $1,135 this year.
 
That’s a 94 percent increase. And while not all workers max out their deductibles every year, these higher deductibles certainly leave them feeling poorer.

Even though Kaiser touted this year's premium increase as "modest" compared to the past, consumers are right to feel that things are getting worse, not better.

ADVERTISEMENT
  • NOT TRUE
    My insurance premium for BC/BS of Illinois rose 25 percent. That's close to 4 or 5 percent isn't it?
  • Above average
    I guess we are ‘excelling’ as a family in our health care contributions compared to the ‘average’ as over the last two years, our contribution has risen $940/mo. while our deductible doubled. Who can afford to absorb an increase like that? It has priced me out of the market for coverage. I am not sure where the Kaiser Foundation gets their figures as everyone I talk to has faced much steeper increases than reported.
  • Half full or half empty
    In a sense you're right but... Lower increases in health premiums are good, because higher increases would be worse. The troubling ratio you describe is mainly due to compensation policy mostly unrelated to health insurance market. Research is showing significant portion of moderation in premiums due to impact of exchanges especially in states where states are aggressively setting them up, eggs CA and NY.
    • Stop Imagining Things
      You don't make a lick o' sense with this comment, David. Quit extolling the virtues of states that are literally drowning in debt from healthcare issues, and concentrate on REALITIES. The reality is that people's premiums are skyrocketing, not rising a "modest" 4 percent. This whole Obamacare scheme is based on imagination and economic daydreams, not realism.
      • Higher premiums
        In addition to premiums going up "only" 4%, the article touched on higher deductibles, but failed to mention higher co-pays. So while my premiums actually went up 11%, our deductibles went up, and, as just one example, in the last two years, the co-pay for an office visit for a specialist went from $40 to $45 to $50. On the flip side, if I could have half the money spent on duplicate billing, wasted paper and postage on said bills, and unnecessary duplicate paperwork included with my insurance EOB's, I could pay my premium for a few months!
        • Healthcare
          So, is this the straw that breaks the camel's back? For a lot of people it will be.
        • Slowing premiums
          Well the May 2013 Issue of Health Affairs, a journal often quoted in this column, contains two articles trying to explain the slowdown in health insurance premiums nationally. JKW begins this column with the assertion that premiums have slowed, since he has noted these findings before. My comment was related to his downplaying the decrease in premiums because compensation has also dropped. Saying that lower premiums is not good because incomes have fallen too doesn't make a lick of sense to me.

        Post a comment to this blog

        COMMENTS POLICY
        We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
         
        You are legally responsible for what you post and your anonymity is not guaranteed.
         
        Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
         
        No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
         
        We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
         

        Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

        Sponsored by
        ADVERTISEMENT
        1. From the story: "The city of Indianapolis also will consider tax incentives and funding for infrastructure required for the project, according to IEDC." Why would the City need to consider additional tax incentives when Lowe's has already bought the land and reached an agreement with IEDC to bring the jobs? What that tells me is that the City has already pledged the incentives, unofficially, and they just haven't had time to push it through the MDC yet. Either way, subsidizing $10/hour jobs is going to do nothing toward furthering the Mayor's stated goal of attracting middle and upper-middle class residents to Marion County.

        2. Ron Spencer and the entire staff of Theater on the Square embraced IndyFringe when it came to Mass Ave in 2005. TOTS was not only a venue but Ron and his friends created, presented and appeared in shows which embraced the 'spirit of the fringe'. He's weathered all the storms and kept smiling ... bon voyage and thank you.

        3. Not sure how many sushi restaurants are enough, but there are three that I know of in various parts of downtown proper and all are pretty good.

        4. First off, it's "moron," not "moran." 2nd, YOU don't get to vote on someone else's rights and freedoms that are guaranteed by the US Constitution. That's why this is not a state's rights issue...putting something like this to vote by, well, people like you who are quite clearly intellectually challenged isn't necessary since the 14th amendment has already decided the issue. Which is why Indiana's effort is a wasted one and a waste of money...and will be overturned just like this has in every other state.

        5. Rick, how does granting theright to marry to people choosing to marry same-sex partners harm the lives of those who choose not to? I cannot for the life of me see any harm to people who choose not to marry someone of the same sex. We understand your choice to take the parts of the bible literally in your life. That is fine but why force your religious beliefs on others? I'm hoping the judges do the right thing and declare the ban unconstitutional so all citizens of Wisconsin and Indiana have the same marriage rights and that those who chose someone of the same sex do not have less rights than others.

        ADVERTISEMENT