There's an inflation number nobody puts on a magazine cover. It's the cost of health insurance. At first glance there's nothing to see. The government's broad measure of health inflation was 3% in the third quarter, right on its six-year trend. But that's not what you pay. What you pay is premiums, deductibles, copays and the bills insurance doesn't cover. Those are rising much faster.
According to a KFF survey of employers, average premiums rose about 5% this year. That was actually less than employers' own costs, which rose 6.4% in the third quarter from a year earlier, the fastest in at least a decade. Employers responded the way they usually do. They passed more of it to workers through higher deductibles, more cost-sharing and prior authorization. Contributions rose 16% for individuals and 9% for families.
Where your raise went
This solves a small mystery. Private wages rose just 3.1% in the third quarter, the slowest in five years. With low unemployment, why weren't wages growing faster? Because the money went to benefits instead. If health prices don't explain the rising costs, KFF says, it isn't insurers' profits or overhead either. People may simply be using more care, including expensive weight-loss drugs, though that hasn't yet shown up as faster growth in the volume of services. The hardest-hit group is people who buy their own coverage through the Obamacare exchanges, who face steep increases this year because of a loss of subsidies.
Greg Ip, who wrote the Journal's analysis, notes this lands in the lap of whichever party is in power. It's also landing on kitchen tables right now, because open enrollment is on at most employers.
Our read
This is a Consumer Protection story, module M11, and it arrives at exactly the right moment. Most people re-click last year's health plan without reading it. In a year when employer costs jumped 6.4% and your share jumped more, that autopilot can cost real money. The plan that was cheapest last year may not be this year, because the premium, the deductible and the drug list all changed under you.
Here's the fifteen-minute check for this open enrollment. Write two numbers for each plan offered. The floor is the yearly premium minus any money your employer puts in a health savings account. The ceiling is the floor plus the plan's out-of-pocket maximum, the most you'd pay in a bad year. Now lay your real expected care against those two numbers. If your family is healthy, the high-deductible plan with an HSA often wins, and the HSA is the one account that's triple tax-advantaged. If someone has a chronic condition or a surgery coming, the richer plan may be cheaper despite the higher premium. If you buy on the exchange, price it without assuming a lapsed subsidy comes back. We're glad to run both numbers with you before the deadline. That's a conversation worth having this week, not next.