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September 24, 2015 - Kim Moore [see other posts]

Deductible increase graphic

Health Care Still Costs Too Much

The annual survey of employers done by Kaiser Family Foundation/Health Research & Education Trust indicates that annual premiums for employer-sponsored, family health coverage reached $17,545 in 2015, up four percent from 2014. The average annual single premium is $6,251. Workers' wages increased 1.9% while inflation declined by 0.2%, and some experts believe the growth in health care costs for employers is part of the reason that wages grow so slowly. There is no indication in this survey that the Affordable Care Act has caused a dramatic rise in insurance premiums, although we know that some of the taxes imbedded in the ACA have been passed on as increased premiums and increased coverage (benefits) have been included in premium increases. Still, the rate of premium increase for family coverage during the last five years was the same rate as from 2005-2010 (27%) and significantly less than the growth rate of 2000-2005 (69%). This makes it hard to argue that the ACA has been especially harmful to "costs" or premiums.

What is astounding to me from the survey is the shifting of cost from employers to employees as illustrated (if you can read it) in the chart above. Since 2010, the deductible for all workers with single coverage is up 67%. You can browse more of these exciting numbers by checking out the summary of the report (with charts) at http://kff.org/report-section/ebhs-2015-summary-of-findings/. The movement toward "more skin in the game" for consumers is obviously well underway with ever higher deductibles ($3,000 single and $6,000 family deductibles are common). These general changes in costs to employees and their families combine with a variety of "gotchas" in many insured situations (out of network unexpectedly, failure to get prior authorization, removal from drug formulary, etc.) to increasingly make insurance less financially protective for the average consumer. These rules for deductibles and co-payments apply to individuals without regard to their ability to pay (income and assets). Hence, lower income employees and families will increasingly face challenges in paying their premiums and paying for their skin in the game (leading to under-insured status). The ACA, in its health marketplace, provides for income-based subsidies and cost sharing support which help balance ability to pay with resources available. That is not the case generally in the employer insurance world where the same benefits are provided with the same costs for all employees, regardless of ability to pay for that skin in the game. That was not much of a problem with $100 and $300 deductibles, but those days are over.

The primary, justifiable criticism of the ACA, in my opinion, is that it did not contain much in the way of cost containment or reduction. Attempting to reach beyond its access and quality improvement provisions was obviously a political step too far. Now, instead of carping about the ACA and much of the solid reforms it has instituted or simply accelerated, what we need is leadership--political and from the health sector--to move on the outrageously costly American health system. I know we are Americans and hence exceptional, but the preservation of our status as the only developed country which even knows what medical bankruptcy is seems to be the type of exception we should be willing to get rid of. While coverage desperately needs to be extended through Medicaid expansion in Kansas and 19 other states, work to control costs, equitably allocate expenses among payors, and make health care more efficient is likewise needed or the new villain--under-insurance--is going to wreak havoc in the American lifestyle for middle-income families.


1 Note: Average general annual deductible is among all covered workers. Workers in plans without a general annual deductible for in-network services are assigned a value of zero.

Source: Kaiser Family Foundation/HRET Survey of Employer-Sponsored Health Benefits, 2010-2015. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 2010-2015; Bureau of Labor Statistics, seasonally adjusted data from the Current Employment Statistics Survey, 2010-2015 (April to April).