where I work at a small business most employees here are under 40 and college educated (college educated people tend to have better health and lower disability rates). But insurance premiums go up 25-40% a year and have for years. at this point a high deductible junk plan costs more than a plan with a $250 deductible at my dad’s place of work at a large company. and these are the total costs, employees and employer combined.
health care inflation was about 6-7% a year until about 5 years ago when it slowed to 4% for various reasons. so what all reasons are there for 40% premium increases when medical costa themselves only go up 4%? after 3 years medical costs go up about 13% but premiums go up 120% or so.
I can think of a few reasons.
the health insurance death spiral. as costa jump so high, healthy people abandon insurance or get high deductible insurance, while the sick stick with better plans hoping to come out ahead. the pool of healthy people shrinks and the sick stay on.
medicare and Medicaid underpay so insurance gets billed a bigger percent of medical costs.
companies are trying to prepare for the affordable care act and it’s new regulations by increasing premiums before the law starts.
am I missing something? rate hikes of 25% will double premiums every 3 years, and they will be 15x in 12 years. however if medical inflation is only 4% costs will only be 60% higher.
will the aca actually do anything to limit rate hikes to closer to the rate of medical inflation?
I assume the statement health care costs have gone up by 7% per year means that specific items (on average) have gone up by this amount. So on average each pill, transplant, birth, etc. costs 7% more. But if the number of procedures has gone up by 5% (made up number), then total medical costs will have gone up by a little more than 12%. You should expect insurance premiums to rise by that 12% rather than the 5%.
Why are the number of procedures going up? The aging population explains some of it, as does the fact that new procedures, pills, etc. are now available. How many people took statins or Viagra 20 years ago vs. now? How many more Lasik operations are being done? And those are the ones that just immediately come to mind.
I think the 7% figure is total medical spending increase which includes the rate of general inflation as well as more utilization and more expensive interventions. So a mix of newer and more expensive technologies (newer and better treatments for diabetes) and more utilization (more people are aware they have diabetes and are being treated for it as an example).
Since the recession costs are only going up 4% a year though. The bad economy is part of it, but a lot of it they still aren’t sure of. Part is that tons of expensive drugs hit the generic market in the last few years (lipitor, zyprexa, plavix, etc etc etc). Part is that there is an assumption we are hitting critical mass in our health care system and we can’t really support much more spending (medical costs may not be able to go much higher than 18-20% of GDP).
But again, since the recession the rate is only going up like 4% a year but insurance premiums are going up 30-40% a year. I don’t know where the extra money is going, or why the medical costs for insured people are going up enough to justify those expenses.
30-40% is pretty steep for health insurance premiums, especially if you claim this has happened year over year. I have seen roughly 20% increases in my own policy over the last five years, but what I see for my clients over that period is more like 10-15%.
As for the discrepancy, I would point to two factors:
rates on an individual go up based on age brackets. Thus, the total national spending might not go up, but if you have now moved from the 30-35 bracket into the 36-40 bracket, the actual spending on your bracket is higher. (Group policies rate the average age of the employees, so the same reasoning applies there, just with more people taken into consideration.)
There have been Obamacare-related changes to health insurance policies, including coverage of kids to 26, mandatory preventative services and changes to pre-existing condition rules. These represent real costs to the insurance company (hence the increase in rate) that might have been paid in another way in the past (hence a small change to overall national spending).
It’s gone up by 25% to 40% for years? How many years? Let’s suppose that the average increase has been 30%. Let’s suppose that this has been consistent for ten years. Then the average premium is now (1.3)^10 times what it was ten years ago. That’s a factor of more than 13. Are you telling us that insurance premiums are now more than thirteen times as large as they were ten years ago? Why don’t you tell us precisely how much the premiums have gone up by and precisely how many years this has gone on?