Rising Healthcare Costs! (7/9/2008)
According to the Wall Street Journal and the Health Research Institute at PriceWaterhouseCoopers medical costs will increase 9.9% in 2008 and 9.6% in 2009. What will your employer do if it faces an approximate 20% increase in health insurance premium costs over the next two years? Based on Healthcare Soundoff’s calculations this will cost you or your employer an average of $200 more per month to pay the premium. What should we purchase health insurance or gas? The way prices for both are going we can’t afford both.
The comments of both Presidential candidates about their solutions to this crisis are weak. One candidate wants the current health insurance market to work. But his comments ignore the fact that the current health insurance market is part of the problem, especially if costs are rising at the rates predicted. The other candidate is avoiding lobbyist money so the lobbyists will have less impact on creative potential solutions. This is a good idea but are we really going to have enough political will to avoid lobbyist influenced solutions?
Do the rising healthcare costs threaten the current system? Will rising costs reduce the number of employers who pay for coverage? According to an AARP survey one-quarter of employers will drop their health insurance coverage if costs rise 15%. Two-thirds of employers said they would pass any increases along to employees. It appears we are reaching a possible “tipping point.”
What Healthcare Soundoff thinks is employers will first look for ways to cut healthcare costs. Employers will do this by moving to “consumer directed health plans” which is a code phrase for “pass the higher costs to employees.” For instance if you increase deductibles from $500 to $5,000 and incorporate a health savings account it is possible to achieve health insurance premium savings of 50% in some cases.
Both employers and employees need to educate themselves now about how savings is achieved and how to lessen the impact of changes in health benefits. There are ways for employers to pre-fund health savings accounts, still raise deductibles to be paid from the health savings accounts, and realize significant savings for both employers and employees.
Health insurers are losing business because of the rapid premium increases. They too are looking for ways to retain business through co-pay, deductible, and pharmacy cost changes. There is still room for employers to shop around for alternatives. Health insurers are also worried about the political activity taking place to ease the market.
There have been suggestions to loosen the regulatory grip of state insurance departments by allowing the sale of health insurance across state lines. This will mean health insurance policies that do not have expensive state mandated coverage (influenced by special interests and lobbyists) will get to market and allow us to shop for limited basic benefits rather than expensive mandated coverage.
In addition, since banks now hold significant funds in health savings accounts, many of these banks are looking to add a health insurance product to their offerings. Banks generally have lower costs than health insurers and this type of competition may provide some needed alternatives in the health insurance market place. Legislation will need to be passed to allow this to happen, but if costs keep rising there will be significant pressure to allow alternatives.
Employers and employees need to know all the alternatives and how to purchase health benefits coverage in a way that balances the need to hold down rising costs and still give broad access to health care services. Healthcare Soundoff’s archives have numerous tips about potential solutions such as nHealth, a creative Virginia health insurer that has introduced a unique product for small business.
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