$20K per year for family healthcare coverage — The new, new normal (who is to blame) — 6 points

1. For the first time, the costs of employer sponsored family healthcare coverage has reached approximately $20,000 per year. The year-over-year growth in this number exceeds average inflation. This does not match the horrendous increases over inflation of several years back.

2. The employee paid approximately $5,547 of this with the employer bearing the rest. This is up just $30 per family since 2017. Average total insurance costs for an individual were $6,896 in 2018, a 3 percent rise over 2017.

As inflation in total premiums has softened just one bit, workers and individuals have paid for that in part through higher deductibles.

3. The blame for increased costs due to one report from the Health Care Cost Containment Institute can be placed high emergency department visits, surgical admissions and pharmaceuticals. We think this conclusion is in part misleading.

In healthcare, the key costs we see in runaway fashion are still pharmaceutical costs. Ie, these seem to be the hardest to rein in. Insurance companies also seem to continue to do very well.

4. The Wall Street Journal article of today on this subject points to hospital mergers and physician becoming employed by health systems as major factors. The AHA responds that in fact hospitals are trimming costs and that others need to do their part.

5. In our view as total inflation in the sector rises slower than it used to, and hospital prices and physician prices rise more slowly than pharmaceutical prices and labor costs, the hospitals and health systems as well as physicians find themselves increasingly relying on smaller margins.

6. The large insurers tend to focus their public relations efforts as to the cost increases on provider costs as the reason for the increased insurance costs. Interesting on a comparative basis it seems the insurance companies still have tremendous cash flow compared to the health systems.

 

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