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Thursday, September 15, 2005

Health Insurance Costs Continue to Outpace Inflation

It comes as no surprise that the rise in health insurance costs, 9.2 percent, outpaced inflation this year. An eye-opening statistic is that the annual cost of health insurance for a family is close to the annual income of a minimum wage worker. The latest wave in healthcare cost containment is “consumer-driven” healthcare. If you would like more information on the consumer-driven approach, here’s an issue brief from the non-partisan Center for Studying Health System Change. From their analysis, it is not clear that the consumer-driven approach will lower costs. Here are more details on costs from the Washington Post:

Health Insurance Outpaces Inflation, Raises by Albert B. Crenshaw, Washington Post: The cost of health insurance for working Americans climbed 9.2 percent this year, the lowest rate of increase since 2000 but still far ahead of both general inflation and workers' pay increases, according to a nationwide survey by the Kaiser Family Foundation. On average, health insurance for a family cost $10,880 this year, with the employer paying $8,167 and the worker $2,713... The total cost almost exactly matches the total annual earnings of a person working full time at the minimum wage... For a single worker, the average cost totaled $4,024, with $3,413 paid by the employer and $610 by the employee, the survey found.

At the same time, the proportion of employers providing health insurance continued its steady decline, falling to 60 percent this year from 69 percent five years ago. Most of the decline was among very small companies ...  noting that less than half -- 47 percent -- of firms with three to nine workers now offer medical coverage to their employees... Absent plan changes, Mercer said, employers project a rise of about 10 percent next year. Kaiser's Altman cautioned that the recent slowdown in increases should not be a cause for any great optimism. "I would say, don't be fooled by the moderation in the rate of increase. We've seen these dips before, and history teaches us they have a way of bouncing back,"...

Altman and others who have watched cost-containment efforts over the years have seen such ideas as managed care burst onto the scene and appear to bring costs to heel. But each time, the new strategy has lost effectiveness, and costs resumed their seemingly inexorable climb. The current "next big thing" is what has been dubbed "consumer-driven" health care, which combines high-deductible insurance with a fund that the individual can use to cover routine costs. In these arrangements, consumers are allowed to accumulate unspent money in the fund, giving them, theorists argue, an incentive to shop and eliminate unnecessary spending. The Kaiser survey found much interest in these types of arrangements but, so far, little actual participation. … "There absolutely is growing interest in consumer-driven arrangements," Altman said, but with the small number of workers enrolled in them, "it's impossible to make a judgment about their effect on health care cost...

    Posted by on Thursday, September 15, 2005 at 01:44 AM in Economics, Health Care | Permalink  TrackBack (0)  Comments (2)

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