My Wealth Builder hosted the most recent edition of the Cavalcade of Risk – be sure to check it out. If you want a bit of a virtual roller coaster, don’t miss this post from Workers’ Comp Insider with a video taken from the perspective of a cell phone tower worker, climbing to 1768 feet – without safety equipment! Yikes. You might need to hold onto your chair while watching it.
Jason Shafrin’s contribution to the Cavalcade was a look at projected healthcare costs in 2013, and it’s a good read for anyone interested in how healthcare spending (and thus, health insurance premiums) will look a year from now. Jason writes about a recent study that predicts a 7.5% increase in healthcare costs next year, but only a 5.5% increase in health insurance premiums for large groups. The difference is most likely caused by the trend towards higher deductible health insurance policies that shift more healthcare costs onto employees. Average out-of-pocket exposure on health insurance policies has been steadily increasing over the last several years (in the individual and small group market as well as the large group market). Choosing a policy with a higher deductible and/or copays is the easiest way to mitigate premium increases, and it’s a popular option among employers and individuals who purchase their own health insurance. Ten years ago, Jay and I had a health insurance policy with a $1000 deductible per person. Now we have a $3500 deductible per person, plus an additional $3500 in coinsurance on an Anthem Blue Cross Blue Shield Core Share policy. If we had stuck with a $1000 deductible all these years, our health insurance premium would be far higher than it is today.
The study Jason references notes that high deductible health insurance policies accounted for 4% of the market in 2006. Over the next five years, that share increased to 17% by 2011. My guess is that it will continue to increase as long as healthcare costs keep climbing at the rate that they have over the past decade. If cost controls succeed at bringing healthcare cost increases more in line with other consumer price increases (projected to be 2% next year) over the next few years, I imagine that the popularity of high deductible health insurance policies will wane a bit. There will always be people who are drawn to the tax advantages of HSA-qualified health plans, but a lot of individuals and employers who opt for higher deductibles are doing so in order to make their premiums more manageable. As long as we continue to have healthcare costs that are climbing at a rate that far outpaces inflation and overall consumer price increases, we will likely see high deductible health insurance plans accounting for an ever-increasing segment of the market.
In addition to a shift towards higher deductible health insurance, large groups also have an increasing focus on wellness programs, which might make their employees less likely than the overall population to need healthcare. This is another possible explanation for why health insurance premiums in the large group market are expected to climb an average of only 5.5% next year, even with an overall 7.5% increase in healthcare costs.