• Want to know why people aren’t happy?

    Every year, the Kaiser Family Foundation publishes its annual survey of Employer Health BenefitsHere’s the summary.  Here’s the chart pack.  Let’s wade right in.

    The average premium for coverage by an employer provided health insurance plan for an individual in 2010 is $421 per month or $5,049 per year. The average premium for family coverage is $1,147 per month or $13,770 per year.  Think about that for a second.  That’s not the Cadillac plan.  That’s the average.  Twenty percent of plans for families cost $16,524 or more.  How has that changed over time?

    Health care premiums have more than doubled in the last decade.  Has your salary more than doubled in the last decade?  I doubt it.  We are putting more and more or our income every year into health insurance premiums.  Do you feel healthier?  Do you feel safer?  Do you feel happier?

    This doesn’t mean that employers are paying all of the premiums, though.  How much of those premiums are workers paying for themselves our of their own income?

    This year was an all time high.  What you have to remember is that this means that not only are the premiums going up; so are the percentages of those premiums that individuals and families have to pay.  So their costs are going up even faster than premiums are.  In fact, this year was the first statistically significant increase in the percentage of premium paid by employees in a decade.

    Economists will say–and they have the studies to back it up–that employees actually pay the full cost of premiums (including the “employer” share) in the form of slower wage growth. Nevertheless, few workers understand this. The perception is that only the employee share is paid by workers. But that’s gone up too, so perception and truth align. Employees are paying more.

    But remember, that’s just the premium.  It doesn’t include cost-sharing – things like co-pays, out of pocket costs, or deductibles.  So how much are deductibles?

    What this means it that even after paying for an increasing percentage of an all time high premium, more than one in four workers in an individual plan still has an annual deductible of $1000 or more.  That’s a lot.

    How did the recession affect employer health benefits?  Well, if companies need to trim their budgets they can either reduce the quality of coverage, or they can make employees pick up a bigger share of the cost.  How often did this occur?

    So looking at the yellow bars, which represent all firms, 30% of them reduced the benefits of the insurance offered or increased the amount of cost sharing for their employees (either in co-pays or deductibles).  Another 23% reduced the share of the premiums that they paid, making their employees pay more.  Again, remember this is at the same time that premiums went up.

    So, benefits reduced.  Cost-sharing increased.  Share of premiums paid increased.  Total premium cost at an all time high.  And this is for employer provided health benefits, which are usually much better and cheaper than what’s available in the individual market.  Depressed yet?

    I know that PPACA has barely kicked in yet.  Just as you can’t blame PPACA for the current bad situation, you can’t fault PPACA for not fixing it yet.  But everyone who thought that health care reform would become more popular after it was passed better take a close look at this.  Things are getting worse, and not slowly; there’s no reason to think that it’s not going to continue.  And since the majority of reforms don’t kick in until 2014, we still have time to continue in free fall.  Moreover, the idea that we would leave the employer-based health care system – which is what this  survey measured – alone, may have sounded like a good talking point, but I’m not sure how popular it will be if these trends continue.

    PPACA has it’s work cut out for itself.  I hope it’s up to the task.

    • This question is probably more appropriate for Austin, but given the emphasis on wage pressure in the face of rising premiums, ie, companies dont pay for increased health insurance costs, workers do through lost wages–it is interesting that headlines are reading, “employees are absorbing the increases, not the employers.”

      Talk about robbing Peter to pay Paul, huh? What gives with this sleight of hand?

      a) Are the economic circumstances so unusual right now that different principles are in play?

      b) Will companies depress wages AND increase worker contributions in excess of health care increases for 2010 to make up for hits they took in year prior OR are they simply buffing their profits?

      c) the MSM dont understand implications and are getting the headlines wrong?


      • @Brad F – I vote for (c). There are two ways workers pay for the entirety of health care costs: (1) a slower growth in wages and other forms of compensation then would otherwise have occurred and (2) fewer jobs/more layoffs. We’ve seen both. If one wants to put the focus on health care costs, that’s the headline I’d write (even though factors other than health care costs are at work).

    • Has anyone been able to link this trend of cost sharing with a trend in decreasing insurance costs? My sense, from what we see in my corporation, is that we increase cost sharing in response to increased costs as opposed to the opposite.


    • I’m afraid I have a very basic question – I don’t live in the US (might be moving though) so apologies that it is such a basic question.

      Premiums have more than doubled (I guess that is true even if your figures are not corrected for inflation) and co-pays have increased.

      My question: what is the money being spent on?

      Have any of the following doubled? Number of doctors, nurses, administrators, cleaners, janitors or hospitals? Insurance company profits? Number of operations? Number of drug prescriptions? Drug prices? Something else? If one of these hasn’t doubled, what has more than doubled?

      I can see the BLS projects health care workers to increase by around a quarter over ten years 2008 to 2018, which seems plausible. But if there was similar growth over 2000 to 2010 it would come no where near explaining what is going on. I could search more myself, but I preseume an expert could point me to something?

    • To Brad and Austin:

      There needs to be a choice (d):

      The MSM understands the situation, but deliberately chooses to report it in accordance with wrong-wing talking points.

      I know one should never ascribe to malice what can be accounted for by ignorance, but the consistency with which the MSM is wrong, and that it is consistently wrong in favour of wrong-wing talking points makes me suspect that the MSM may not be as ignorant as we may like to believe.

      • @Gus Halberg – Nah, not buying it. While it isn’t rocket science that it’s total compensation that is subject to the forces of labor supply and demand, it is subtle enough that I find it entirely plausible most folks don’t get it, newspaper editors included.