Tuesday, April 17, 2012

Who will have Health Insurance in the future ?

From: Annals of Family Medicine. 2012;10(2):156-162.

It was previously estimated that the cost of a family health insurance premium would equal the median household income by the year 2025 by DeVoe and colleagues.

In an updated model, it is estimated that this threshold (i.e. the cost of a family health insurance premium would equal the median household income) will be crossed in 2033, with a "best case scenerio" that the PPACA (Patient Protection Affordable Care Act) may extend this date only to 2037.

When did Insurance Premiums rise to these historic levels ?

In the "managed care" era of the 1990's, health care inflation slowed. However, there was a public backlash and many employers had abandoned that model. In 1999, there was a steep increase in health insurance premium inflation, coupled with declining inflation in household incomes.

The passage of the Patient Protection and Affordable Care Act:

Interestingly enough, when there was debate in congress regarding health care reform in 2009/2010, health insurance premium inflation had slowed to levels not seen since the 1990's. Despite this slowing, the annual inflation rate of health insurance premiums still outpaced US household earnings, which stagnated from 2008 to 2011 and included an absolute reduction in average household income from $50,300 in 2008 to $49,800 in 2009. Therefore, as median household incomes decreased, healthcare premium inflation had increased.

The passing of the PPACA in 2010 saw the number of persons without health insurance in the United States rise to a historic high of 50.7 million people after 5 million Americans lost employment-based health insurance in the 2007–2009 recession. The irony of this was that the PPACA was supposed to reduce the number of uninsured. This can be explained by the language of the PPACA which is supposed to take place over several years however.

Model of median household income and health insurance premium increases:

In this model, from 2000 - 2009, health care premiums and median household incomes were compared. The average annual increase in insurance premiums was 8.0%; household incomes rose an average of 2.1%.

If health insurance premiums and national wages continue to grow at recent rates and the US health system makes no major structural changes, the average cost of a family health insurance premium will equal 50% of the household income by the year 2021, and surpass the average household income by the year 2033. If out-of-pocket costs are added to the premium costs, the 50% threshold is crossed by 2018 and exceeds household income by 2030.
Factoring in employers contribution:

Since most workers do not pay for the entire cost of healthcare, the model was updated to include employers contribution to family healthcare. The average amount an employee pays for a family health insurance premium plus out-of-pocket family health care expenses was factored in. Without major structural changes in the US health care system, the employee contribution to a family premium plus out-of-pocket costs will comprise one-half the household income by 2031 and total income by 2042.

 What is the effect with the passage of the PPACA:

There is no consensus among experts regarding the effect of the PPACA with regards to increasing or decreasing the costs on private health insurance. Assuming the PPACA actually slows cost growth, this threshold of insurance premiums exceeding household income is delayed only by 4 years.

What are Insurance Companies and employers doing to curb costs:

Employee contributions to insurance premiums and out-of-pocket expenses have grown faster than overall premium costs, suggesting that insurers have slowed the rate of growth in premiums by shifting more costs onto patients. Even though patients no longer face double-digit increases in insurance premiums each year, they now pay higher deductibles and co-payments and receive fewer covered services. 

In a 2010 Kaiser Family Foundation and Health Research and Educational Trust employer survey:

30% of employers reported having reduced the scope of health benefits or increased cost sharing.
23% increased the share of the premium a worker has to pay.

Among large firms (200 or more workers):'

38% reported reducing the scope of benefits or increasing cost sharing, up from 22% in 2009.
36% reported increasing their workers' premium share, up from 22% in 2009. 

Healthcare as a part of our GDP: 

Health care continues to comprise a growing portion of the total US economy. It has risen from 13.7% of gross domestic product (GDP) in 2000 to 17.3% of GDP in 2010. From 1960 to 1999, the growth of national health care expenditures exceeded the GDP by 2.4% per year. This same 2.4% differential occurred from 2000 to 2009. If health care costs continue to rise at current unsustainable rates, it is doubtful that affordable insurance coverage will be available for low-to middle-income Americans in the near future. Further, our model did not include the taxes paid by American workers each year to finance Medicare and Medicaid—nearly $900 billion in 2009—which may increase with the PPACA. 

How does our Healthcare policies affect other aspects of the economy:

It has been observed that expensive US health care increases production costs and makes American manufactured goods less competitive, which results in lower wages and fewer jobs in the manufacturing industry. For example in 2006, General Motors' spent $1,500 more than Toyota in health care costs per car.  

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