Sunday, September 29, 2013

Insurance Costs Rise Faster Than Wages

Employer sponsored health insurance is the most common type of health coverage in the country. It is something that every employee wants and the contribution towards this coverage, deducted from the worker’s wages, is in most cases seen as a reasonable cost in view of the possible benefits. With health costs still beyond the means of a large part of the population, the need for employer sponsored covered can only grow.

But the cost of this insurance is, in terms of its effect on incomes, is increasing.

Almost Flat Wages

In 2011 the costs of family health insurance coverage increased by 9% and that of individual coverage by 8%. Against this, the rise in the current year over 2012 has been 4% for family coverage and 5% for single coverage. So while the lower increases are good news, the fact that wages have gone up by only 1.8% shows that the cost, to the employee, has gone up. Today, employer sponsored family insurance costs top $16,000.

On top of this, many employers are modifying the health insurance policies to include a higher deductible. This means that the insured will have to pay more for medical tests and treatments before the coverage kicks in. Add this to the growing cost of coverage and the low wage increase and employees are paying significantly more from their own pockets for health insurance.

The more moderate increases in health insurance costs since the end of the recession are the only silver lining in this situation. The Kaiser Family Foundation, a non-profit that has studied the issue sums up the situation it in this way – coverage costs are going up, cost sharing is going up and wages are almost flat. The implications for the family budget are clear. The only positive is that inflation remains low.

It’s Not The Same For All 

Generally speaking the employer covers most of the health insurance costs of an employee, but the actual change in costs and its effect is often felt directly by the employee. There are some lucky workers whose employers absorb health insurance cost increases so the employee contribution remains static. Insurance rates also depend on the type of coverage, the area lived in and the size of the employer. Those working for smaller companies tend to suffer the most from insurance cost increases as the employers do not have the same negotiating leverage as large companies do.

Little Hope Of Relief 

According to America’s Health Insurance Plans (AHIP), the national trade association representing the health insurance industry, more than one sixth of the U.S. economy is directed towards health care spending, but the value received in not anywhere near the $2.7 trillion that is being spent. Up to 30% of this amount -$800 billion – is wasted or used in inefficient or redundant ways. While a great deal of discussion has taken place on the issue, concrete long terms steps to bring the situation under control, Obamacare notwithstanding, are yet to emerge. In other words, the hopes for any short term relief on rising health care costs are slim.

Contact Insurance by Allied Brokers and have your questions answered about how to keep your insurance cost in check.

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