Winning Spirit Newsletter Spring 2008

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On the Health front

The Challenges of Healthcare Inflation
By David Linney

Most change in life is incremental. Often, things change at a steady pace without our notice. For instance, many people with employer health insurance have been affected by the rising cost of healthcare. Don’t be caught unaware—increases in healthcare costs affect everyone.

Insurance Premium and Healthcare Inflation
Heath insurance premium costs and healthcare costs continue to greatly exceed the rate of inflation, as seen in the following examples:

For the 158 million Americans covered by employer health insurance, the Kaiser Family Foundation Employer Benefits 2007 Annual Survey reported that the cost of health insurance premiums rose 6.1% in 2007 compared with a 2.6% increase in general inflation. In prior years, premiums rose at an even higher rate and there was an even greater gap versus the increase in general inflation. The report stated that the total annual cost of employer health insurance premiums (paid by the employer and the employee) average $4,479 for single coverage and $12,106 for family coverage. Since 2001, the cost of health insurance has increased by 78%, according to the report.

The U.S. Department of Labor in its August 2007 “Consumer Price Index Report for Urban Wage Earners and Clerical Workers” reported that the compound annual rate of inflation for medical care was 5.7% for the three months ended in August 2007. Medical care in recent years has consistently been one of the expenditure categories with the highest inflation rate.

Analysis of Health Inflation
The reasons for inflation are: an aging population, new medical technology, the high cost of drugs—particularly, new biotech drugs—and the rising costs of hospital care and physician services. These reasons, combined with the fact that healthcare is a profit-driven business, create a formula for continued inflation.

Employers have tried to manage health inflation by passing on a portion of the cost increase to employees in two ways: through increased payroll deduction or a reduction in benefits that offsets premium costs. The result is that employees have to pay more for health insurance premiums and out-of-pocket medical costs now and in the foreseeable future.

Some employers have also responded by sponsoring a high-deductible health plan. The Kaiser survey reported that 5% of employees in 2007, versus 4% in 2006, are obtaining health insurance through a high-deductible, consumer-driven health plan. These plans have high out-of-pocket costs. Their entry into and current position in the marketplace indicate that higher costs will be transferred to more consumers as the number of participants in these plans continues to grow. For employees, out-of-pocket costs today often include not only a deductible and co-insurance, but co-payments as well.

A Breaking Point?
There may come a time when employers may no longer be able to afford to sponsor a health insurance plan for employees. The Kaiser survey stated that in 2007, 60% of employers offered insurance, versus 61% in 2006 and 69% in 2000. Smaller employers are even more adversely affected by the high costs of health insurance than larger employers. The good news is that 99% of large firms with 200 or more employees continue to offer health insurance.

Some employees do not enroll in employer health insurance either because they cannot afford their premium portion or do not believe they need health insurance (in the case of some young workers). They want to keep their portion of the insurance premium cost in their own pocket. These employees add to the growing number of the uninsured and erode the insured pool that risk can be spread over for any particular insurance carrier. There are now 47 million US citizens without health insurance. Studies have revealed that some people do not seek medical care in a timely manner. They frequently end up going to the emergency room after a small medical problem becomes a larger one. Such employees are called the underinsured. Their numbers are growing.

What This Means for You

These trends mean that families and individuals with bleeding disorders will be paying more for employer health insurance premiums, as will every one else. It also means that you will be paying higher out-of-pocket costs than individuals without an expensive chronic health condition.

In addition, it means that more members of the bleeding disorders community may find it harder to obtain and pay for employer health insurance. They may have difficulty accessing needed bleeding disorder medical services because of inability to pay their portion of costs.

The future of employee health insurance is not bright. As premiums continue to rise at rates higher than inflation, the market will eventually reach price inelasticity—the point at which growing numbers of people will be unable to afford coverage.

It is important to know that the bleeding disorders community does have an infrastructure of support that helps to counterbalance the negative impact of inflation. It includes a number of assistance programs through state and federal programs; some NHF Chapters; and manufacturer factor product assistance programs.
The previous article was taken from HemAware, a publication of the National Hemophilia Foundation, January/February 2008 issue.