Are We Truly Paying Less for Insurance?

photo credit: stuartpilbrow

Recently the Kaiser Family Foundation and the Health Research and Educational Trust reported that health insurance premiums increased in cost more slowly this year compared to increases over the last ten years.

Is this good news, or just more bad news with a thin candy-coated shell? Unfortunately it’s tending more towards the latter case.

The Kaiser Family Foundation report indicated that the average premium went up by around five percent over 2008, contrary to recent trends in which health insurance costs have risen at a pace more rapid than that of both wages and inflation.

The flip is that even though the rate of premium hikes has slowed down a little, people are actually getting less coverage for their money.

Out-of-Pocket Costs Hiding the True Cost

In an effort to slow down the rate of increase, insurance companies are offering coverage that requires workers to pay more out of pocket before their health insurance kicks in (high-deductible health plans). So what’s really happened here is not that the premium costs have risen more slowly, it’s that people are opting for cheaper plans.

The problem is, these types of policies just aren’t suitable for every family, and being forced into high-deductible plans could prove to be very expensive for families with high ongoing healthcare needs.

Another issue is that these plans are generally most suitable for people who are typically healthy. And as more of these low-risk people move to high-deductible plans, the premiums for traditional plans will increase faster because the ones who are “left behind” are, on average, higher risk individuals.

The Real Underlying Issue: Premium Increases in Trying Times

Finally, there is an additional underlying problem.

Premiums have increased 119% since 1999. During the same period, wages increased 34% and inflation increased 29%. This 5% increase is unusually low, and it’s highly unlikely that premium increases will stay that low.

Until the real problems contributing to the rapid increase in premium costs are addressed, we are simply not going to see a consistent reduction in the rate of premium increases. And the main problem is that healthcare costs—for a wide range of reasons—are themselves increasing very rapidly. Until healthcare costs are controlled, healthcare premiums will, on average, continue to rise at a rapid rate.

Tags: money

This entry was posted on Tuesday, October 14th, 2008 at 3:01 pm and is filed under Consumer Driven Healthcare, Health Care Costs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.