Less for More

The principle of private health insurance.

Click here for a guide to following the health care reform story online.

Polls consistently show that a majority of Americans are satisfied with their health insurance. This satisfaction is generally believed to derive from the fact that most Americans are not suffering from a serious illness and therefore have little occasion to discover what their coverage actually provides. As Julie Rovner reported Sept. 8 on National Public Radio, the healthy majority accounts for only 3 percent of all health care spending. To find out how lousy your health insurance is, you have to get really sick.

Part of being satisfied with something you pay for is feeling good about the price. As Victoria E. Knight reports on the Wall Street Journal’s health blog, three new studies show that we’re paying more and getting less. But because of the peculiar way the health industry has evolved in the United States, it’s nearly impossible for most people to know how much they’re paying even for something as simple as a health insurance premium.

According to a new Kaiser Family Foundation study, employer-sponsored health insurance costs for families rose 5 percent during the past year, making health care one of the very few industries able to raise prices during a recession. (In the larger economy, prices fell 0.7 percent.) In all likelihood, though, if you’re covered by your employer, you have no idea how much you spent last year on health insurance, because you didn’t write a check to pay the premium; it was deducted from your weekly paycheck. If you’re very conscientious, perhaps you did calculate what you paid in health insurance by scrutinizing your weekly pay stub and multiplying that number by 52. But even that wouldn’t really give you the true cost, because it leaves out your employer’s portion of the premium. If you think that’s just your employer’s problem, you’re wrong, because over time employers typically pass these costs onto employees in the form of forgone wages. Since 1999, premiums have risen about 130 percent—128 percent for the workers’ portion and 131 percent for the employers’ portion. When you factor in forgone wages, employee costs associated with health care premiums rose more like 260 percent during the past decade.

Health costs rose last year in other ways, too, but to experience these you had to see a doctor. According to the Kaiser survey, 21 percent of firms offering their employees benefits economized either by scaling back what was covered or by shifting some of the cost onto employees. Fifteen percent did this by increasing the portion of the premium paid by workers. Another common way to do this is to increase deductibles. As recently as 2006, among people who get individual (i.e., nonfamily) health insurance through their employer, only 10 percent paid more than $1,000 in deductibles. Now 22 percent do.

The recession may be over, as Fed Chairman Ben Bernanke attests, but according to a Sept. 10 survey by the Mercer consulting firm, nearly two-thirds of employers still plan to shift more health insurance costs onto employees in the coming year. Forty percent will do it by increasing employees’ contribution to health premiums, and about the same proportion (39 percent) will do it by increasing deductibles and other out-of-pocket costs. A virtuous 37 percent will not shift costs onto employees in the coming year, but that doesn’t count future forgone-wage increases. A separate survey by Watson Wyatt, another consultant, matches Mercer’s finding that 40 percent of employers will increase out-of-pocket costs for employees. It also reports that an unspecified percentage will alter their physician networks, thereby compelling employees either to pay more for a doctor who gets dropped from the network or to find a new doctor. Another unspecified percentage will pare down coverage for spouses, requiring them “to complete health risk assessments,” and coverage for dependents, investigating more aggressively whether they’re too old to be eligible.

What all this adds up to is that most people’s health insurance is becoming steadily less satisfactory. If only they knew it!