We find ourselves in the middle of one of the greatest wealth transfer periods of all time. Those with wealth must decide whether they want to make transfers, and if they do, they must decide how much, to whom, when and in what structure?
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A new study called the Milliman Medical Index, produced by Seattle-based health-care analytics company Milliman Inc., shows that employees’ health insurance costs rose by 6 percent in 2014, while employers’ costs rose by 5.4 percent.
At the same time, it costs more than twice as much to insure a family in 2014 as it did in 2004, according to the study. Then, it cost an average of $11,192 to insure one employee and his or her dependents, compared with $23,215 in 2014.
The employer pays $13,250 of that cost, and the employee, through payroll deductions, co-pays and deductibles, pays $9,695, an increase of $1,185 from 2013.
“Even if we are bending the cost curve, there are few other household expenses that increase at four figures a year,” said Chris Girod, co-author of the index.
This marks the ninth year in a row in which insurance costs for the average American family have increased by more than $1,100, according to the study.
The dramatic rise in health-care tabs comes as Colorado and other states are launching investigations into why costs continue to increase. This year, Colorado lawmakers approved creation of the Health Care Cost Commission. The new group begins work in July and must complete its work by the summer of 2017.
The reason for the shift in costs from employer to employee is simple, according to Scott Rankin of Greeley-based insurance brokerage Leading Edge Financial Group.
“As premiums go up, employers can only handle so much,” he said, “so the cost will increase for the employees.”
Some employers have stopped providing benefits altogether, Rankin said, especially small businesses with less money to spend. But others weigh the importance of providing benefits for attracting talent.
Most businesses are deciding that the incentive power health insurance provides when it comes to hiring is worth the expense of helping employees with premiums, but as costs continue to increase, that will become less common, Rankin said.
Those businesses that have withdrawn benefits did not come to the decision easily, Rankin said. Employers in that situation usually have spent a few years trying to hang on before reaching their breaking point.
The only solution to the problem, said Rankin, is to reduce the cost of health care, which will in turn bring down the cost of health insurance.
Increasing health-care costs are an ongoing problem nationwide, and until those increases are slowed, Rankin said, health-insurance costs will continue to rise. The renewals he has seen so far for 2015 show premium increases as high as 50 percent for an Affordable Care Act-compliant plan, he said.
Health-care costs are a difficult thing to track, since every hospital charges differently for services, and prices vary widely between what hospitals charge and what independent clinics or freestanding facilities charge.
Health-care spending is much easier to track and can give an idea of the increase in cost. According to the U.S. Bureau of Economic Analysis, health-care spending rose at the fastest pace since 1980 in the first quarter of 2014, climbing at an annual rate of 9.9 percent, following a 5.6 percent increase in the fourth quarter of 2013.
Some of the increase in spending can be attributed to expanded access to care as a result of more people being covered under the Affordable Care Act, but the increase also can be attributed to higher costs at the provider’s office. Experts predict that the increases will continue.
PricewaterhouseCooper’s Health Research Institute predicts an increase in health-care spending of 6.5 percent in 2014, more than twice as large as the 3.2 percent increase seen in 2013.
“Any number of factors could influence health-care costs in coming years,” said Scott Weltz, co-author of the Milliman Medical Index. “The economy is a big one, but there are others. Provider risk-sharing and increased transparency may contribute downward cost pressure.”
Provider risk-sharing has been in practice since 1990, but provisions of the Affordable Care Act have brought the idea to the forefront. Risk-sharing can be set up in many different ways, but in general, providers form an agreement with insurers to take on a certain amount of risk in return for a set percentage of shared savings.On the other hand, different factors also could push health-care costs up in the coming years, Weltz said, including specialty pharmaceuticals and expensive technologies.
Molly Armbrister can be reached at 970-232-3129, 303-630-1969 or email@example.com. Follow her on Twitter at @marmbristerBW.