Health Care Reality Will Be Ongoing Economic Drag

I have often thought that staying physically fit is not only a good way to live but also makes enormous economic sense as well. Not that staying fit will keep one’s healthcare premiums totally in check, but the simple fact is the cost of healthcare insurance in our country is downright scary. Staying fit is one way of keeping premiums not quite as egregious.

The pace of change in healthcare premiums has been even scarier. How much so? Do you care to make a best guess as to what the average increase in a family’s annual healthcare premiums are over the last decade? 50%? Keep going? 75%? Still too low? 90%? Getting closer but still not there. The Wall Street Journal gives us this answer and much more in writing, Employer’s Sharply Raise Workers’ Share of Health Costs,

Overall, annual premiums for families reached an average of $13,770 this year, up 114% since 2000.

Will Obamacare address and mitigate the underlying forces driving this increase? Honestly, I am not optimistic. I view Obamacare as nothing more than another of the redistribution and rationing programs in which those who can pay will absorb the costs for those who can’t. But how are these increases truly being absorbed? To an ever increasing extent, the cost of healthcare is being shifted from the employer to the employees. The WSJ highlights this reality in writing,

Employers passed health-insurance costs onto employees at a sharply higher rate this year, and businesses’ premiums grew more slowly than they have in a decade, according to an annual survey of companies.

The increased cost-shifting reflected an acceleration of a trend that has been on the rise for years. As companies struggle to cut costs amid difficult economic times, more of them are reducing benefits they offer workers or making workers pay more for them. Still, companies are paying nearly three-quarters of workers’ health-care premiums.

Employees paid an average of about $4,000 toward their family coverage this year, up 14% from last year, according to a report by the Kaiser Family Foundation and the Health Research and Educational Trust. But total insurance premiums paid by the employer and the employee rose just 3% for a family plan—the slowest rate of growth in 10 years, according to the data.

The nonprofit research groups surveyed about 2,000 large and small companies between January and May.

“It’s the first time I can remember when employers have coped with costs by shifting it all to workers,” said Drew Altman, the Kaiser Family Foundation’s president and chief executive.

The survey showed workers with family plans are now paying 30% of their premiums, compared with 27% last year and 26% five years ago.

Businesses explained the shift by pointing to stark choices between cutting staff and reducing benefits.

“It’s no surprise, since businesses are struggling to keep their doors open,” said James Gelfand, director of health policy at the U.S. Chamber of Commerce. “The premium increase may have been modest but it’s still a premium increase and businesses can’t absorb those costs.”

As the increased costs are shifted to employees, what is the knock on economic impact? There is no doubt that discretionary consumer spending will suffer a further drag. That reality is nothing more than Principles of Economics 101.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

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