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. The Affordable Care Act is not the reason for the slow recovery and lack of high paying jobs for low skill workers. This is a trend that has been going since the early 80's. The recovery is real in the sense that GDP has been growing steadily at a rate of roughly 2.5% since the recession ended in late 2009 (newsflash, the stimulus worked) and the unemployment has been steadily dropping. The reason issue we are facing deals with a skills gap (not enough workers with the right credentials / experience) and wage stagnation due to corporate America being focused solely on maximizing profits for shareholders and not caring about the American middle class. Why should they? Multi-billion dollar mutlinational companies keep offshoring their profits in order to avoid paying taxes (which makes our deficit worse) they convince Americans to fight amongst themselves. If you want to create jobs and reduce the deficit, raise the minimum wage and change corporate tax laws. Of course, if you want to continue to belive that tax cuts for wealthy create jobs (which they don't) and allow corporations and the wealthy to continue to make you cover more and more of the costs of maintaining infrastructure, funding the military and other government services, then keep voting Republican. Hopefully someday you wake up and realize what's been going on since Reagan took office.

        2. Helloooooo, my name is Kate. I am so joyous to share this wonderful testimony about what Dr. Osoijiakhena, a great spell caster, did for me and my family. I wedded a year and 6 months ago, we were very happy during this whole period, i really love my husband so so much. I started noticing changes when he started coming home late at night, he stop paying attention to me, i later found out that he was having an affair with another lady, i dont know what she did to get to him but she really got a hold on him. He started spending weekends with her, and threaten for divorce. I was so heart broken and devastated, i spent many night thinking on how to get my husband back. A friend took it upon herself to to introduce me to one Dr. Osoijiakhena, a great spell caster, who once helped her with a spell that reunited her family and helped her husband secure a very prolific job. Though i had my doubts and never believed, but i decided to give it a try because i was helpless. I contacted Dr. Osoijiakhena, the Spell caster, to help me reunite my family by bringing back my husband from that other woman and break whatever hold she had on him. He only just told me that it's a minor issue, once i provide and do everything he will ask me to do, then i will have my family back again. I did everything he required. And he did it!!!!! My husband returned back to me and pleaded for forgiveness, and i also secured a well paid job in a big company, just as the great spell caster, Dr. Osoijiakhena said. I am so so happy to share my testimony on this wall. I am using this medium to tell every one that has same or similar problem to try the great Dr. Osoijiakhena through his mail: drosoijiakhenaspell@gmail.com......he is so real!!!!! He can also help you with: (1) IF YOU WANT YOUR EX GIRL/BOYFRIEND TO RETURN BACK TO YOU (2) IF YOU WANT YOUR HUSBAND/WIFE BACK (3) IF YOU WANT TO BE PROMOTED IN YOUR OFFICE (4) IF YOU WANT YOUR MAN OR WOMAN TO LOVE YOU (5) IF YOU WANT A CHILD (BARREN) (6) IF YOU WANT TO BE RICH/WEALTHY (7) IF YOU WANT YOUR HUSBAND/WIFE TO BE YOURS FOREVER (8) IF YOU'VE BEEN SCAMMED AND WANT YOUR MONEY BACK (9) IF YOU ARE HAVING DELAY IN GETTING MARRIED (10) IF YOU HAVE A COURT CASE AND WANT TO WIN (11) IF YOU'RE A DRUG ADDICT AND YOU WANT TO REALLY STOP (12) IF YOU CANNOT IMPREGNATE A WOMAN (STERILE) (13) ALL TYPES OF DISEASES I advise you to contact the great Dr. Osoijiakhena, the spiritualist for solutions via his email: drosoijiakhenaspell@gmail.com

        3. Sergeant McNally is buried in Cathcart Cemetery on a hill known as McNally%u2019 Hill. The Cemetery is in a natural bushland setting and is very well maintained.The emergency department at Ararat Hospital is known as the John McNally Emergency Department. Cathcart is approx. 4.6 km from Ararat and is approx. 345 m above sea level.

        4. My spring chicken of a Mom is turning 75 years young. She is a big fan of Frankie and I think she would get a big kick out of the film. I wanted to take her to the Broadway play but am priced out. Thanks for your time and consideration. Oh yea, Wildwood! Joie

        5. I thought this company would go bankrupt in 2013/2014. I predicted that four years ago. I was wrong. It will take another couple of years, but they will get there.

        ADVERTISEMENT