While everyone is focused on the exchanges and the Medicaid expansion, it’s worth remembering that the majority of Americans still get their insurance from a completely different source: their jobs. So if you want to know what’s happening with the majority of Americans, with respect to health care costs, it’s important to follow employer-sponsored insurance plans. Each year, the Kaiser Family Foundation publishes a report on this topic, and it’s just been released.
Let’s start with the bad news. Insurance is expensive. The average individual employer-sponsored health plan in 2013 costs $5,884 a year. That’s the average plan, not the super-awesome-Cadillac plan. The average family plan cost $16,351. That’s a massive amount of money. You may think that your high deductible health plan gets you a much better deal, but the average premium for a single person HDHP was still $5,306, and for a family it was $15,227. That’s still a lot.
Ironically, there’s some good news in those numbers, though. The average single plan’s cost only went up 5% this year. The family plan only went up 4%. That’s not much different than what we saw last year. But it’s way different from what we were seeing before that. Family plans jumped more than 9% in 2011. In the ten years from 2001 to 2011, they more than doubled.
Slowing down the rate at which health care costs rise is very important. As everyone reading this likely knows, health care spending consumes an incredibly large percentage of our national spending, and many believe that if it continued to increase at old rates, it would be unsustainable.
So why don’t we all feel great? Well, first of all, it’s because health care spending is still incredibly high. A couple of years of 5% or lower growth aren’t going to make a huge change quickly. But more importantly it’s this:
This is a slide I show in every talk I give on health care reform. It shows health insurance premiums and worker’s contributions to them in the top two lines, and worker’s earning and inflation in the bottom two lines. First, it’s important to note that workers’ earnings have barely beat inflation for the last 14 years. But what’s really important to note is that the two sets of lines are on a startlingly different trajectory.
Health care, and insurance, are rising so much faster than both inflation and wages. This means that worker’s contributions are rising faster, too. One of the reasons that wages are rising slowly is that any possible increases have to keep being plowed into health insurance.
But another thing to note is that just as increases in insurance costs have been slowing (that’s good!) so has growth in the economy (that’s bad). Wages went up less than 2% last year. That’s still half of the growth of a family plan.
It’s great that health care spending is slowing. But it will be better if that slowing happened in a period of robust economic growth. Whether we’ll see that in the future remains to be seen.
For those of you who are interested, here’s my post from last year on the report.