Health Insurance Expenses Skyrocket under ObamaCare

Published: Tue 15 Jun 2010

Donald Chase

Health Insurance Expenses Skyrocket under ObamaCare

Businesses that provide employee medical insurance are braced for another large jump in medical expenses next year, and more will call upon employees to share a larger portion of the costs, according to a recent PriceWaterhouseCoopers report.

For the first time in history, the majority of the American labor force will have health insurance deductibles of at least $400, the consulting organization explained in the report given to the Associated Press.

Deductibles are the amount of money a policyholder pays out of pocket each year for medical care before health insurance coverage kicks in. They are different from co-insurance and co-payments.

In 2008, only one-fourth of the businesses that participated in the yearly survey said their workers had deductibles of $400 or more. That rose to 43 percent in 2010 and is predicted to exceed 50 percent in 2011.

Workers who must pay more through things such as higher deductibles help rein in cost inflation because they tend to seek less medical care.

Medical Inflation

The health care reform legislation passed by Congress and signed into law by President Obama in March has just begun to take effect and should not have much impact on costs in 2011, according to Michael Thompson, a PriceWaterhouseCoopers principal.

"In general, it's a continuation of a fairly high rate of medical inflation," he said.

PriceWaterhouseCoopers discovered that medical expenses will rise an estimated nine percent next year. However, that does not mean that employees will see their monthly health insurance premiums rise by the same amount.

Companies usually try to lessen the impact of a rise in costs by absorbing part of it, changing health plans, or asking workers to pay a bigger coinsurance percentage or higher deductibles.

For example, a health care cost rise of more than nine percent was predicted for 2009. Nevertheless, the average yearly premium rose just five percent for family plans that year and remained the same for individual coverage, according to another study from the Kaiser Family Foundation.

The nine-percent increase predicted for 2011 is actually somewhat smaller than the 9.5-percent spike PriceWaterhouseCoopers has seen this year. Thompson explained that the patents of multiple best-selling drugs will expire next year and have to face competition from lower-priced generics. That will help mitigate the rise.

The PriceWaterhouseCoopers report also showed a precipitous decline in the number of companies that subsidize health coverage for retirees. The report said just 22 percent of companies with over 5,000 employees subsidized retiree medical coverage after age 65 in 2010. That figure is down from 37 percent last year.