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.