Will the Cost of Health Insurance Eventually Eat Up Your Entire Paycheck? Study Says Yes.

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Here’s a depressing thought, at least for those of us who occasionally get sick or injured, or take prescription medicine, and who own fewer than three mansions: If current trends continue, the cost of health insurance for a typical American household will eat up all of its paycheck(s), and then some, by 2033.

Let me just repeat that: If you’re a typical American, the cost of health insurance will be greater than all the money you earn.

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That’s the conclusion, at least, of a new study conducted by Richard A. Young and Jennifer E. DeVoe and published in Annals of Family Medicine. The two doctors reached this depressing conclusion by comparing recent increases in health insurance costs with considerably less hefty increases in family income. Here’s how they explain it:

From 2000 to 2009, the average annual increase in insurance premiums was 8.0%; household incomes rose an average of 2.1%.

If health insurance premiums and national wages continue to grow at recent rates and the US health system makes no major structural changes, the average cost of a family health insurance premium will equal 50% of the household income by the year 2021, and surpass the average household income by the year 2033.

It gets worse:

If out-of-pocket costs are added to the premium costs, the 50% threshold is crossed by 2018 and exceeds household income by 2030.

Wasn’t the Affordable Care Act – so-called “Obamacare” – supposed to drive down costs, or at least to drive down the rate of increase in these costs? Yes. If Obamacare indeed delivers on these promised savings, Young and DeVoe calculate, we’ll gain a little bit of breathing space: The cost of health insurance won’t top median family income until 2037 instead of 2033.

Yeah, that’s not really all that comforting.

But hey, it could be worse. In fact, when DeVoe and colleagues originally ran the numbers back in 2005 for an earlier study, they came to an even more dire conclusion – that the cost of health insurance would outstrip the typical family paycheck as early as 2025. What changed? The economic downturn put a bit of a damper on health care costs, slowing down their rate of increase.

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Are Young and DeVoe being too pessimistic? Noelia de la Cruz, writing for Business Insider, notes that a recent study published in Health Affairs suggests that the Affordable Care Act could bring about bigger cost savings than most experts, including Young and DeVoe, are anticipating:

Researchers equipped 26,000 previously uninsured Richmond, Va. residents with health care plans and tracked them between 2006 and 2007.

In the end, they found the participants cut health care costs by 50 percent with fewer emergency room visits and more access to preventative health care.

In the Washington Post’s Wonkblog, Sarah Kliff offers another possible reason for optimism:

Young and DeVoe’s projections do not take into account the most recent year of health spending data, which showed health-care costs growing at the same pace as the rest of the economy, not faster. There’s a lot of debate over whether that slowdown is the start of a long-term trend, or a short-term side effect of the recession.

Then she pulls out the rug:

But even if overall health-care costs are growing slower, that doesn’t necessarily translate to lower insurance premiums: In recent years, employers have shifted an increasing chunk of health insurance bills to their employees.

In conclusion, reading about the future costs of health insurance is probably bad for your health.

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