I received this troubling report about the health insurance market from a small business owner:
I thought to share one data point on the cost of healthcare in Massachusetts. We just got our renewal for our Blue Cross Blue Shield policy. The premium increase was about 35%. The insurance broker tells us that the cost increases are supposedly caused by the new ACA requirements, expensive Boston hospitals and “other causes” (whatever they may be.) In other words, we have little transparency into the real causes of the price increase.
Family plans now cost about $21,000 a year – with about $2,000 per person deductible. The cost went up about $5,500 this year for us. That now appears to be about a market rate if I compare it to the Healthcare Connector rates. That is a lot of money.
Here is a real-life example of one of our employee’s compensation. I just pulled the numbers from our payroll system so these are actual figures using the new health insurance rates:
The employee makes $72,000 a year. Family healthcare is now $21,000. Combining the healthcare deductions with all other taxes, deductions and fees causes the take home pay to be $38,000, or mere 52% of gross salary. In other words, half of the pay is gone before the person sees a paycheck. This does not include the 14% or so that the company has to pay in various employment taxes and fees, which makes the actual total compensation cost to be $82,000 to the company. In other words, as a company, we pay out $82,000 and the employee gets only $38,000, or 46% of the total compensation. In other words, there is a 54% “tax” on this person’s compensation. That is a very punitive system.
The healthcare premium increase just took $5,500 from the employee’s annual pay. There is no way to support family with $38,000 a year in the Boston area. We cannot afford to increase the employee pay so we will very likely lose this employee sometime soon.
I don’t know what to blame or what is the true cause of these cost increases. I would like to advocate that the Senate find ways to reduce corporate taxes and do something radical about the cost of healthcare because the current healthcare and tax math is untenable for companies and employees.
This is a powerful data point — well articulated.
I’ve heard many times that it’s really crushing for small businesses, but this really lays it out.
It’s a very intractable problem. The Romney/Obama approach is worth trying for a decade or so, but if things keep going the wrong direction, we are going to need even stronger medicine.
What’s needed is, first and foremost, transparency. And this was a step in the right direction:
It would be good if the Medicare reporting requirements were improved to ensure the publicly reported data is as accurate as possible – for example, including the cost to doctors components, and requiring individual doctors to file individually.
Extending this reporting requirement to private medical insurance companies would go a long way towards a better understanding of abuses and cost inefficiencies.
Here’s another data point. My firm’s health care premium declined in 2014 v. 2013. We further decreased our cost by increasing the deductible and covering that by a larger contribution to the HSA. After a decade of large increases, we have had decreases in two of the last three years. The writer of the original post apparently charges 100% of the health care premium to the employees, while my firm pays a substantial part of the premium plus makes a HSA contribution. We have also had a refund because Harvard Pilgrim did not spend enough of the premiums on patient care. More than one person is covering a child in early twenties.
I have always viewed health insurance as one of the vital perks of employment. The employee who has a family health insurance policy is receiving that as a benefit. It’s part of their compensation. Yes, health care is expensive, but we all want it and we in Massachusetts have the best possible health care available to us.
To reduce health care costs, some stakeholder is going to lose out. Doctor’s salaries? Drug costs? Hospital employees? Benefit reductions or limitations?
I’m looking forward to finding out over the next year or so how the conflicting trends stack up against each other. We have to wait for things to settle a bit before forming a judgment
I am fortunate to have employer-provided health care insurance and I am pleased that health care in Massachusetts is covering 98% of people in the state. But it seems that the costs are still much too high. And if we went to single-payer we’d be saving everyone a lot of money, especially the state budget where health care costs are 40% of the budget http://www.mass.gov/bb/h1/fy14h1/exec_14/hbudbrief3.htm and costs to municipalities, individuals and businesses are also too high. Would you cosponsor the single-payer initiatives in the 2015/16 session? http://masscare.org/ma-single-payer-bill/massachusetts-single-payer-legislative-co-sponsors/ even though you didn’t cosponsor them in the previous session? We should at least find out how much we would gain in savings by implementing single-payer. And then we should just do it, as it is so nice being able to get medical care when you need it and not have the paperwork greet you first! I lived under single-payer in Sweden for 2 1/2 years and it was a wonderful experience. I’d really like to see it here.
I’m not sure what single payer means in a Massachusetts context. But putting that aside, I don’t think it is the year for another massive health care system redesign in Massachusetts. The regulators and hospitals are still trying to figure out what we did in 2012 with a major cost-control bill. This is something you have to keep adjusting, but we should leave a decent gap to see how things work before attempting more major reforms.
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