Insurance Premiums Still Rising Faster Than Inflation and Wages

By Reed Abelson

President Obama may not have much trouble persuading the nearly 160 million people who have health insurance through their employers that the system needs to be fixed, if a new survey of employer health benefits is any indication.

Many working Americans may be experiencing something akin to sticker shock. The average cost of a family policy now exceeds $13,000 a year, having doubled over the last decade, according a new survey by the Kaiser Family Foundation.

While premiums rose a relatively modest level — 5 percent — last year, they are still going up much faster than overall inflation and workers’ wages, said Drew Altman, the chief executive of the foundation. “It’s one of the reasons why people feel the pain,” he said.

Kaiser, a nonprofit research group, conducts the benefits survey annually with the Health Research & Educational Trust, a research organization affiliated with the American Hospital Association.

By Mr. Altman’s calculation, similar increases over the next decade would translate to the average policy for a family costing in the neighborhood of $24,000 a year.

“When you see premiums, it’s obvious that small employers and working people are just going to be priced out of the market,” he said. Many Americans may need subsidies to be able to afford a policy, he said. Congress and the White House are still struggling to figure out how to reduce costs of insurance over the long term.

The premium figures count the total money the employer and the employee spend together for the insurance coverage.

Employees are not only paying more in their share of premiums — $3,515 a year, on average. They are getting less coverage for the money, according to the survey, as their own out-of-pocket contributions increase through higher annual deductibles and co-payments.

“What we’ve seen in this survey over the years is the gradual fraying of the employment-based system,” said Mr. Altman. Since the country backed away from H.M.O.-style managed care in the late 1990s, it has been without “a new answer to the rising cost of health care,” he said.

Although large employers are also cutting back on the generosity of their coverage, “the real Achilles heel is the small employers,” said Mr. Altman. As many as 40 percent of employees at small companies pay a deductible of $1,000 or more, compared with only 21 percent of workers in 2007.

While the economic downturn has not yet resulted in a significant increase in the number of employers that have stopped offering coverage altogether, many companies said they planned to continue asking employees to shoulder more of the cost next year. One fifth of companies surveyed said they were “very likely” to ask employees to contribute more toward the cost of premiums, and 16 percent said they were “very likely” to increase the amount of the deductible.

The average cost of a family insurance plan

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dan1138 September 15, 2009 · 10:26 am

Duhhh–costs rise because of an aging population, technology, and the regulatory burden placed on health care. A story with the headline “Medical costs rise faster than inflation” is about as noteworthy as “Sun rises in east this morning” or “Gravity causes weight to drop”

B. Mull September 15, 2009 · 10:47 am

With Obamacare health premiums will increase faster than ever. And not just becausee there are no cost controls. The status quo keeps average premiums down because many sick people can’t get insurance at all. When they are brought into the system (as they should be) everybody will have to pay more.

Then there’s the poor. People who couldn’t afford insurance will get subsidized dollars and be told to buy coverage. It will be the same as with the “cash for clunkers” subsidy (price of cars went way up.)

The only way to keep premiums down is to put the whole health care industry on a budget. And the only one who can do that is–the government!

Jennifer September 15, 2009 · 11:09 am

“small employers and working people are just going to be priced out of the market”

Wrong. We are already priced out of the market, and have been for a while. Even if you make $65,000/yr, $13,000 is 20% of your pre-tax income.

Absent from all this discussion is what is a fair percentage household income to pay for insurance (and this is not health care, mind you, just the insurance premiums). Because in my state, $13K doesn’t even get more than a bare bones high-deductible policy, you still have to pay a $5000 out-of-pocket before it even kicks in.

Until the actual ability to pay is factored in, healthy people will continue to take their chances and opt out.

Jeff September 15, 2009 · 11:09 am

This is what all the opponents can’t seem to get through their heads. When we talk about the healthcare reform costing the government/tax payers $900 billion over 10 years, it’s not as if this is a new cost. This is mostly the government taking on costs that will otherwise still be paid by the public. It’s not like deciding to buy a new car or not, where the new car is an expense that you can avoid. The citizens of this country are going to pay trillions of dollars for health care over the next 10 years one way or another. By having the government take on some of that cost and manage it through programs designed to bring down costs across the board, all that we are doing is shift the cost to the government and hoping that in the process overall costs can be brought down. Yeah it will cost $900 billion over 10 years, but if we don’t do anything the cost to tax payers out of their own pockets will almost certainly be even higher.

How can this country still be held so hostage by morons?

It’s the same with Medicare and Medicaid. People talk about how those programsare going to go bust in coming years and act as though this is a problem with the programs themselves. But without those programs those costs aren’t going to go away, nedeed the cost to the nation would be even higher without them, so if we can’t afford Medicare now, if we got rid of it it wouldn’t mean that the country woudl save money, it would just cost everyone even more. The costs aren’t going away, these aren’t optional costs. The only way to eliminate Medicare/Medicaid AND save money is just for more people to die sooner, and by more people I mean tens of millions of people dying 5-10 years years earlier that otherwise. As far as I can tell, this is the only option that the Republicans have ever been able to support….

A single-payer system for basic coverage, with private catostrophic coverage, like France has, is the only real solution that will actually bring down costs and improve care. This country is just too hostage to morons and profit to ever get it right….

R.A. September 15, 2009 · 11:12 am

In Maine it’s presently more than $25,000. Maine Sen. Olympia Snowe, opposed to a public option, hopes to ‘stem the tide.’ In which case next year it might only go up or down a thousand.

C.C. September 15, 2009 · 11:19 am

The only way to significantly slow the rise in health care costs would be through a single-payer health care coverage system or a variant, such as the modified Medicare-for-all coverage plan proposed by Ted Kennedy. Large industrial nations around the world have proven that single-payer systems can significantly cut costs without cutting the quality of care and outcomes. In a national health insurance situation, the government, as payer, is able to negotiate reasonable national health care price schedules as well as negotiating drug costs and health provider reforms. Only the US is now failing in this task, because it still treats health care as a commodity — basically a 19th-century idea whose day has passed.

The public option would put more downward pressure on prices than any other plan on the table this year, so any reform bill without a public option must be rejected. In the future we’ll need single-payer to truly control health care prices. 2009 is merely Year 1 for true health care coverage reform.

Jay M September 15, 2009 · 12:31 pm

So dan1138…. What’s your solution? Kill off the old people, trash the technology, and do away with regulation?

Jeff is right. It’s not as if we’re not paying for medical care for the poor and uninsured anyway. We’re just doing it in the least efficient, most expensive way by requiring them to go to the emergency department of the nearest hospital.
We recognize this and decide how to do it in a way that’s better for everyone.

Wonks Anonymous September 15, 2009 · 1:04 pm

This is, or used to be before the profession was flooded with freshwater guys, basic Econ 1 stuff.

Monopolists are able to increase their profits by raising prices and lowering the quality of their product. Insurance companies, which often “compete” in markets with one or two other insurance companies, are effectively monopolists.

Which is why we need a public option. To keep the insurers hionest.

ray bellamy, md September 15, 2009 · 1:11 pm

B. Mull is correct: premiums will go up with Obamacare. You see, good regulation of private insurers forcing them to enroll those with preexisting conditions and eliminate lifetime caps on cost will result in cost shifting so that the rest of us will pay more so those sick can be covered. There are no significant cost controls in the legislation, and no limits on what insurers can charge for policies. Another reason costs will go up is increased demand: sudden influx of millions more policies sold and newly insured, so economists predict a rise in costs within the healthcare sector. CBO also predicts a 10% rise in drug prices. The industries who contributed to Congress and the White House and are now being rewarded with the possibility of millions more policies and pills sold are salivating. The decisionmakers should start over without the lobbyists and this time consider the proven cost reduction strategies of Single Payer and perhaps a method to compensate physicians which does not result in overutilization of tests and procedures.

alex bau September 15, 2009 · 1:17 pm

Medical malpractice in the USA is grossly out of balance with the situation in most other countries. That difference penalizes everyone except the lawyers, who collect 30 to 50 percent of the awarded amount plus costs. Why is this situation unbalanced, unfair, inappropriate and expensive? Owing to the same legislative ineptitude, inertia and profiteering by legislators (in the form of election contributions) that has contributed to our many regulatory collapses, including the most recent financial one. Note, that for every $1 in contributions, the legislators provide upward of $1000, sometimes as much as $100,000 in profits to the benefiting donors. But let us set that aside. Consider first the two parties most directly involved, patients and doctors. Many patients suffer various degrees of impediment as a consequence of medical or surgical intervention without there being overt malpractice. For instance, infection can occur and require complex procedures that leave the patient impaired. General anesthesia and intubation to allow breathing can result in paralysis of the palate, with difficulty in swallowing and speaking. And so on, and on. Why should these patients, or those who lose their suits, be denied assistance, while those who win, be given multimillion dollar settlements? Their difficulties are no lesser, their needs are no smaller. How can we deal with that inequality? And remember, in one way or another, all of us pay for both the awards and the assistance, whether by insurance premiums (with profit to insurance companies) or tax increases. Now consider doctors.
How would you like to do your everyday work with a constant eye on the lawyer looking over your shoulder, and what would you do to reduce the risk of that lawyer crying “gotcha!”? You would practice defensive medicine, doing not what is best, but what is likely to be proof that you “neglected nothing”. Oh my, and does that cost! Failure to control malpractice costs, and therefore the ripple effect of insurance premiums and medical procedures, is the single, most glaring omission in the current approach: it needs a strong revision. We must stop driving sufferers into bankruptcy or inadequate treatment, and doctors out of continuing practice because they cannot afford to pay insurance premiums. What, then, may be an alternative?
The alternative to costly and inequitable current malpractice situation is obvious, but has been ignored. It comes in two parts. The first concerns patients. Never mind whether malpractice was involved or not. A suffering patient needs assistance. That assistance should be provided through an objective assessment of the needs and paid from a public fund. The fund should be financed either from an addition to the medicare levy, or through mandatory contributions added to license fees for all health industry participants: hospital administrators (yes, they are responsible for keeping their facilities in good repair, including absence of multiple antibiotic resistant organisms), medical and nursing personnel, pharmaceutical companies (their drugs often cause problems), etc. The second part concerns malpractice as such.
The problem with malpractice is, that it is both an assault and an administrative matter. If someone held down another and amputated his/her limb, it would be a criminal offense. If a doctor does not verify which limb he/she cuts off, that is the same thing, and the penalty should be the same, sought in the same way. Of course, the matter is not always as clear: but then, is anything, where dispute is possible? But the principle should be clear: if a doctor did something criminally negligent, then he/she should be criminally prosecuted. This option does not exclude legislatively mandated professional tribunals to reassess competence and licensing. And that brings one to the administrative component.
Current administration of licensure is inadequate. States collect licensing fees but the system serves only to protect the guild: those professionals who are already established in each state. Instead, there should be a single, national registration that not only licenses, but periodically reviews the record of each practitioner. Where numerous or serious complaints have been lodged, or criminal prosecution undertaken, then appropriate review and, if necessary, disbarment should be implemented. Bad doctors are not numerous, but when they occur, they must be removed. And sufferers, whether harmed by malpractice or by fate, need relief. The game should be ended, for it is no game, and some sense substituted – at a lesser cost to all.

George Ennis September 15, 2009 · 1:58 pm

Sounds like the free market for healthcare services is working well. As anyone who has studied Economics 101 markets are very efficient at allocating goods; in this case to those who have the highest incomes and can pay the cost of rising health insurance premiums and do not have a pre-existing condition.

Of course actual experience shows that overall the US has one of the most ineffective and inefficient healthcare models among industrialized countries. All countries are facing challenges with managing costs; it’s just that the US should drive over the cliff first.

Jeff September 15, 2009 · 2:02 pm

The reason that Medical Malpractise is so much more costly here is because the overall cost of care is higher and the majority of the cost of malpractise is payment for continued care for the victem.

Malpractise costs are almost zero in countries with universal health care because the cost of the care is born by the state. So if Republicans really want to bring down malpractise costs teh best way to do it is with universal single-payer.

Nick September 15, 2009 · 2:05 pm

So, our choice. Status quo or mandatory health insurance. Neither of which will reduce premiums or the rising costs. Because the final bill will more than like eliminate subsidies, the gains will be not being dropped, no lifetime caps, no denial because of pre-existing conditions. But, there will also be no public plan, the co-ops will be too small to work, no tort reform, no policies purchased and regulated at the national level to create larger groups. and insurance will still be regulated at the state level Just an unfunded federal mandate to buy insurance or pay a tax penalty of 50% what a policy would cost. And who can afford $6500 extra in taxes (penalties) in the lower and middle income groups?

So, what is working through Congress right now is a tax increase disguised as health care reform by requiring people to buy insurance from an industry with no incentive to cut costs and to be provide health care by people who want to make as then can from medical procedures.

The bottom line, what could emerge from Congress will not improve the current situation. It may make it worse, but most likely will keep things the same. But, for one difference, people who will have to find way to pay for health insurance or face penalties. This means they will spend less for other goods and services. Thus, any economic recovery will be painfully slow because average family budgets will have to come up with and extra $500 – $1000 a month for health insurance; especially those who cannot afford health insurance because they are poor or out of work.

In my case, I have been unemployed and COBRA already ran out. I did not opt fro COBRA, because it was going to cost me $500 a month out of the $1800 I receive in unemployment (which is also running out). I cannot imagine how I would make ends meet if I had to pay $500 a month for insurance while being unemployed. If I chose not to buy insurance; I will have to pay a fine of $3000, plus taxes on unemployment. Hopefully, I get a job soon and I do not have to face unemployment again.

Finally, the idea that health insurance is still provided by one’s employer, and not portable if you leave your job, is insane. So called health care reform still keeps this insane part of the system in place. So, if no public plan, or single payer system is put in place, the n President Obama should do the right thing and just leave the current system as is. The proposals actually will hurt consumers and lower income taxpayers hard; a bad trade off to give health insurance companies 30 million more customers. Also, the insurance companies will find a way out of providing the provisions being touted (no denials, et. a.); why? Because, they can locate their operations off shore and write policies under a foreign country’s law. They do this now domestically (find the state with the least regulation to base themselves); there is nothing to stop them now and there will be nothing to stop them then.

Babs September 15, 2009 · 2:38 pm

Alex, you are correct on many counts. Disagree with legislatively mandated professional tribunals. It’s like peer review–the fox guarding the hen house. Bad doctors right now are rarely removed but simply move around to maim and torture others. I’ve been in the healthcare field for 30+ years and have seen this too many times. Most doctors are not willing to point the finger at other practiioners and take away their very lucrative livelihood.

Michael September 15, 2009 · 2:49 pm

How is this possible when doctor salaries (adjusted for inflation) have been stagnant for well over a decade?

dan1138 September 15, 2009 · 3:46 pm

No—my solution is to accept that we get great value from health care, although it could be made more efficient. Artificial joints, coated stents, statins–and many more have increased lifespan and quality of life. It’s worth paying for.

My beef is with stupid articles like the above and people who abuse their bodies with food and tobacco and then look for the rest of us to pay for THEIR behavior. Under Obamacare we can’t charge the obese higher premiums. Well, why not ? We charge younger drivers higher premiums and houses in hurricane zones higher premiums for insurance.

Scipio September 15, 2009 · 3:51 pm

As an advocate of a single payer system, my opinion is that this is the only option that will reduce costs by controlling them – rationing medical procedures. Unfortunately, this option is not on the table nor has it been seriously considered. What we get will likely aggravate the situation not help it. Of course, the usual recriminations from the lunatic fringe will follow. The pattern has been set – oppose everything, water down any change until there is nothing much that has changed and then say “I told you it wouldn’t work”.

mike September 15, 2009 · 8:17 pm

What i would to see are the above graphs starting,say , 1991;
I remember decreasing costs with increasing hmo
and ppo insurances. The longer observation period will be more
meaningful.

learned_hand September 15, 2009 · 9:26 pm

Illegals don’t want to be covered by an Obama plan, because they currently receive free and unlimited healthcare under the Emergency Medical Treatment and Active Labor Act.

//en.wikipedia.org/wiki/Emergency_Medical_Treatment_and_Active_Labor_Act

The patients crowding delivery rooms in some of this country’s busiest hospitals (including Parkland Memorial, the 2nd busiest) are 70% illegal immigrants, underwritten by financially strapped hospitals, our bankrupt Medicaid system and the US taxpayer.

//www.dallasnews.com/sharedcontent/dws/news/localnews/stories/061206dnmetmoms.d9b9669.html

The same is true of many routine, long-term treatments such as renal dialysis (and even multiple kidney transplants), at an eventual cost of more than $1,000,000 per illegal.

//seattletimes.nwsource.com/html/nationworld/2008369322_immigdialysis09.html

Hospitals are never reimbursed for most of services that they are forced to provide to illegals under the law, while US citizens who subsidize the illegals’ free healthcare wait behind them in long lines for services.

This is both an outrage and an outrageous waste of money.

At the very least, make insurance MANDATORY for illegals (and citizens) now using emergency room services for FREE. It is illegal to drive a car without insurance, it should also be illegal to go to an emergency room without insurance and not pay.

This would save BILLIONS and get them and us out of emergency rooms and into legitimate primary care. Much cheaper and better outcome than the ER alternatives.

By the way, you are going to need at least 25,000 more doctors…better start building those medical schools now…

snapscan September 16, 2009 · 1:56 am

Limit healthcare benefits to a max with consideration to age. With over 5 billion people in the world, there is no need to have unlimited benefits for just a few when the cost of that care really does not bring value or justification to the amount of monies spent with unlimited benefits.

Let our future generation have a chance to live without worries of healthcare.

Dnarb September 16, 2009 · 4:41 am

Europe has a more progressed aging society, but ye have much lower health care costs.

The most important problem in the US is unhealthy lifestyles (Obesity) which pushes up the cost of care.

Another problem is that the US is a litigation-prone society which pushes up the cost of medical care insurance for everyone.

nobuyuki September 16, 2009 · 5:45 am

im japanese.
the number of doctors and nurses required legally per 100 beds in the us is too high.its about twice of the oecd average . Cut down it to the oecd average at least. seach oecd health data .

maggie September 16, 2009 · 10:51 am

I don’t know about that “modest” increase. My small NYC non-profit was hit with an 18% increase a couple of months ago. By tinkering with the plan (reducing benefits, increasing co-pays), we were able to mitigate the increase slightly, to 12.17%. And I’ve been given to understand, by my broker and others, that double digit increases were all over the place in NY, with some at more than 20%. It’s crazy and unsustainable.

Stack September 16, 2009 · 12:31 pm

I worked all my life paying the insurance company. The cost comes out of your pay one way or another. I have to blame the Harvard, Yale, and off-shore intrest groups for steeling what the can from me and all America. It time for America to stand-up and get their thoughts together, and do something. By the way, do see the Republicans doing anything, or the well paid off Democrates.

lightdee September 16, 2009 · 12:56 pm

dan1138 writes “costs rise because of an aging population, technology, and the regulatory burden placed on health care”
Japan and Germany, to name just two, have much larger aging populations and more healthcare regulations, and they do not have the cost problems that we have in the US.

They did the smart thing for their people and capped costs, which of course the doctors and hospitals don’t like, but the people are much healthier that here in the US, their healthcare costs less, and nobody goes bankrupt when they get sick – tradeoffs I would make in a heartbeat. Dan, your dogma has blinded you to the reasons for our healthcare cost problems.

//www.pbs.org/wgbh/pages/frontline/sickaroundtheworld/