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Why Does My Health Insurance Cost So Much?

Nov 17, 2007
Health insurance costs have nearly doubled in the last decade. In some cases, employer health insurance costs have more than doubled. The increase in health care cost has caused a "trickle-down" economic policy for consumer's share of the health care burden.

As costs have risen for employers, employers can handle price increases in three ways:

-absorb the price increase
-make benefit changes to offset the price increase
-pass along cost increases to employees

As the last decade has progressed, many employers have faced double digit increases each year. In the late 1990's, after a period of relative calm in the health insurance market, prices began to rise dramatically and employers were faced with the aforementioned choices to handle ongoing pricing pressure.

So what does this all mean for consumers? Well consumers have been asked to pay more for the price of the health insurance in the form of more money being taken out of their paycheck. Compounding more contribution towards the cost, employers have introduced high deductible health plans that have shifted more of the insurance liability to the consumer. We call this a double whammy. Consumers pay more for insurance while paying more towards their deductible and out of pocket liability.

Consumers are facing increased pressure to pay for more medical procedures straight out their pocket instead of the health insurer paying for some or all of the cost of many procedures. As consumers of one of the best health care systems in the world, the cost of health care does not come without consequences.

These consequences equate to more cost to consumers and employers. We have access to new medical procedures, new and improved technology for treatment of diseases, a wide array of pharmaceutical products, the building of new hospitals and free-standing surgery centers, lawsuits without boundaries, legislative mandates on what insurers must cover, uninsured patients and the list could continue on.

When a health insurer packages all the great options together, the costs are bound to rise dramatically over time. So next time you look at your paycheck and wonder why the part you pay is so much, think about the components of health insurance detailed above. You can still scream if you want, but remember you have access to one of the best medical care markets in the world.

Health insurance is still not something that the government pays for outside of Tricare, Medicare, Medicaid and the children's plans that exist today and are available to those in these categories. The cost for these services is on the rise also. There is no free lunch. Taxes are largely resonsible for the funding of these government programs and any future mandates on employer health insurance will most certainly equate to either higher taxes for consumers and employers.
About the Author
Scott is a partner in ESP Benefit Design, an employee benefits insurance firm based in Westerville, Ohio. (614-882-8535) Scott has an MBA from Franklin University. Scott has worked with over 6,000 customers. Email Scott at scott@espbd.com

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