Health Insurance Premiums Up 131% in Last Ten Years

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Today, the average cost of a family health insurance offered by an employer is $13,375. That’s up 131% over the last decade—a period in which inflation rose only 28%. And one estimate says that if costs continue on their current trajectory, premiums will go up another 166% in the decade ahead.

The data was collected by the Kaiser Family Foundation and comes via USA Today:

Since 1999, health insurance premiums for families rose 131%, the report found, far more than the general rate of inflation, which increased 28% over the same period. Overall, health care in the United States is expected to cost $2.6 trillion this year, or 17% of the nation’s economy, according to the non-partisan Congressional Budget Office.

At the same time costs have gone up dramatically, the policies have grown less generous, and more likely to add deductibles to be paid by the policy holder:

The annual survey of more than 2,000 companies also found that 40% of small-business employees enrolled in individual health plans pay annual deductibles of $1,000 or more. That’s almost twice the number who paid that much in 2007.

Unsurprisingly, employers will be passing along the most recent rises in premiums to their employees, as reported in the Washington Post’s look at the Kaiser survey:

Forty percent of employers surveyed said they are likely to increase the amount their workers pay out of pocket for doctor visits. Almost as many said they are likely to raise annual deductibles and the amount workers pay for prescription drugs.

Nine percent said they plan to tighten eligibility for health benefits; 8 percent said they plan to drop coverage entirely. Forty-one percent of employers said they are “somewhat” or “very” likely to increase the amount employees pay in premiums — though that would not necessarily mean employees would pay a higher percentage of the premiums. Employers could simply be passing along the same share of the overall increase that they are doing this year…

A major business lobby weighed in Tuesday, saying that if current trends continue, annual health-care costs for employers will rise 166 percent over the next decade — to $28,530 per employee.

Of course, health care reform is supposed to help us avoid another decade of drastic price increases. But will it? The WSJ reports that portions of the middleclass will be hurt financially—because they make too much money for assistance, and yet they make too little to afford health insurance without it being a large burden. One man interviewed in the WSJ story who lives in Massachusetts, where if you don’t have health insurance you are subject to a fine, pays the annual penalty, which is cheaper than any insurance premium. He sums up his predicament thusly: “I can’t use up all of my savings just to buy mandatory insurance,” he says. It’s like penalizing “the homeless for refusing to buy a mansion.”

Or perhaps, as the Washington Post reports, it is young people—folks in their 20s and 30s who are generally healthy and more likely to skip out on health insurance—who will be hit by any national requirement to have insurance:

In part, young adults are uninsured because they are less likely to work for employers who offer coverage; they may not qualify for public programs such as Medicaid; and even the skimpiest private insurance plans may be too expensive alongside hefty student loan payments and credit card debt.

But some young people — nicknamed the “young invincibles” — are also likelier than other Americans to assume that they won’t need health insurance or to decide that they’d rather spend their money on other things.

To discourage that attitude, the Finance Committee bill would fine individuals who do not purchase coverage. An early draft of the proposal set the penalty at $750 or $950 per year for single people, depending on income. But according to various insurance experts, even the least expensive plan under the bill could cost more than $100 per month, making it cheaper for people to pay the fine than to buy insurance.

Fining people who don’t opt into a program seems a little ass-backwards—and it also seems that it’ll bring about all sorts of administrative costs to enforce. Shouldn’t the plan be attractive enough so that people actually want to sign up? A positive rather than negative incentive? Maybe I’m asking too much.

A must-read for anyone interested in fixing American health care is the Atlantic Monthly’s story “How American Health Care Killed My Father.” It’s written not by a politician or doctor or insurance wonk or even a “writer,” but by a guy whose father died unnecessarily—basically due to an infection he caught in a hospital because someone didn’t wash their hands. (That’s just one thing the writer would like to fix: Can we actually make doctors wash their hands for chrissakes?)

The story takes a very big-picture view of the situation, and among other topics, questions something assumed. Namely, that it actually makes any sense whatsoever to use insurance for all medical care expenses, big and small:

Insurance is probably the most complex, costly, and distortional method of financing any activity; that’s why it is otherwise used to fund only rare, unexpected, and large costs. Imagine sending your weekly grocery bill to an insurance clerk for review, and having the grocer reimbursed by the insurer to whom you’ve paid your share. An expensive and wasteful absurdity, no?

And here’s another snippet from the piece to chew on:

Let’s say you’re a 22-year-old single employee at my company today, starting out at a $30,000 annual salary. Let’s assume you’ll get married in six years, support two children for 20 years, retire at 65, and die at 80. Now let’s make a crazy assumption: insurance premiums, Medicare taxes and premiums, and out-of-pocket costs will grow no faster than your earnings—say, 3 percent a year. By the end of your working days, your annual salary will be up to $107,000. And over your lifetime, you and your employer together will have paid $1.77 million for your family’s health care. $1.77 million! And that’s only after assuming the taming of costs! In recent years, health-care costs have actually grown 2 to 3 percent faster than the economy. If that continues, your 22-year-old self is looking at an additional $2 million or so in expenses over your lifetime—roughly $4 million in total.

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