The Straight Scoop

Premiums for job-based health insurance increased by 6.1% this year, the lowest rate of increase since 1999, the Kaiser Family Foundation reported this week. Also, the number of firms offering high-deductible plans increased by nearly 30%, and premiums for these plans were the lowest of all plans while employers made generous contributions to spending accounts for their workers.

Pop quiz: How many of you saw that as the lead of yesterday's reports? Not many.

The lead we often read was reflected in The New York Times story that said: "The cost of employer-sponsored health insurance premiums has increased 6.1 percent this year, well ahead of wage trends and consumer price inflation?the modest slowdown in insurance inflation mainly reflects cutbacks in coverage by many health plans, which have found ways to make employees pay more for their care."

This chart and its caption show the bias in coverage of health care issues.

This is a serious drop in premium costs, yet the big story seems to be that costs are still rising at twice the rate of inflation.

And reporters continue to get the story wrong: The Washington Post reported: "The average annual premium for family coverage amounts to $12,106 in 2007, of which $3,281 is paid by the worker. (The employer picks up the rest.)"

Wrong.

All of the health premium is part of the employee's compensation package. But only about a fourth of it is visible to the worker because the employer writes the check for the rest out of the worker's pre-tax compensation.

And the Post points out that, "The $12,106 average cost of family coverage this year is roughly equivalent to a year's salary for a full-time worker earning the minimum wage, which is $12,168."

So how on earth do people think that an employer mandate ever could work since it would force employers to virtually double the wages of these workers? Job loss would be guaranteed.

 

Some news about high-deductible plans from this survey of about 2,000 employers:

 

  • Workers in these plans had the lowest premiums of any plans (HMOs, PPOs, POS plans), averaging $10,693 this year. (PPOs were the highest at $12,443.)

     

  • Workers in Health Reimbursement Arrangement plans receive an average contribution to their spending account from their employer of $915 for single coverage and $1,800 for family coverage.

     

  • 88% of these plans covered preventive services outside the deductible.

     

  • The number of workers in high-deductible plans increased from 2.7% last year to 3.8% this year, and while still small, this is nearly a 30% increase.

The number of workers in this survey in high-deductible plans may be too small to have an overall impact on spending trends. But employers are offering consumer-directed options in many other ways than simply the HSAs and HRAs measured in this study. These new tools to engage employees as partners in managing their health costs may be a reason for the lower cost trends. That is the study we really need.

For some workers, the combination of the less-expensive, high-deductible insurance, the employer contribution to spending accounts, and access to preventive care may reflect the best choice.

***********

And it is important to remind ourselves that employment-based health insurance still is much more expensive than the average individual policy. eHealthInsurance, our favorite on-line broker, reported that for 2006 (the latest year for which figures are available):

 

  • The average annual premium for individual health insurance was $1,776 in 2006 (compared to $4,479 for job-based coverage in 2006).

     

  • The average family premium was $4,128 (compared to $12,106 for job-based plans).

     

And, not surprisingly, many of these buyers are opting for higher-deductible plans to get the lower premiums for their insurance coverage.

***********

But this isn't stopping the other side from criticizing this option. A new study on "Health Savings Accounts and High-Deductible Health Plans" for The Bell Policy Center in Colorado does just that. It says that HSAs "leave many lower-income workers exposed to high out-of-pocket expenses they may not be able to afford…[and] are by no means a solution to the major problems in today's health care system."

Good grief. We've been saying all along that they are one tool to begin to help moderate health costs, and the Kaiser study shows that is happening.

But unfortunately, this Bell Center study will be used by the the Colorado Blue Ribbon Commission for Health Care Reform in its efforts to develop a grand-scheme health reform plan for the state. You can predict the outcome.

I will be speaking in Colorado next month to try to set the record straight. Here is a talk I gave to about 80 state legislators in Ohio last week to encourage them to consider more free-market options.

Grace-Marie Turner

RECENT NEWS ARTICLES AND STUDIES:

Market Forces in Health Care

Caring for the Vulnerable
Health Affairs, September/October 2007

The latest issue of Health Affairs focuses on vulnerable populations, factors that contribute to poor health, how to improve immigrant care, and policies to address disparities. It includes papers by Wharton Professor Mark Pauly, AEI's Tom Miller, and Harvard Professor Kate Baicker. READ MORE

Making a Difference in Differences for the Health Inequalities of Individuals
Thomas P. Miller, American Enterprise Institute
Health Affairs, September/October 2007

Policy interventions should focus on the degree to which health conditions are persistent, avoidable, and treatable. Assistance should be targeted to people who are at greater risk for such conditions amid the most pronounced gaps between their available resources and likely economic needs. The highest-yield interventions should address prenatal and early childhood care and reformation of destructive lifestyle practices. Improving outreach, education, convenience of access, and service delivery represents a more important factor than expanding the level and scope of insurance coverage. Vulnerable people are better served by more pluralistic social processes that facilitate, but do not mandate, more effective choices and trade-offs. READ MORE

Getting Old
James C. Capretta, Ethics and Public Policy Center
National Review Online, 09/13/07

Senator Hillary Clinton spoke this month before a meeting of the Alliance for Retired Citizens, and said she saw no reason to change Social Security and Medicare. Senator Clinton may promise "no changes in benefits," but her plan has costs as well. In the case of Social Security, there will be a tax increase, and most likely the middle class will pay it. And to keep Medicare costs from rising, she would allow the government to tell some beneficiaries they cannot get the care they seek. Presented with this information, perhaps the public will be open to more sensible reforms. READ MORE

Cancer Society's Deadly Medicine
Michael D. Tanner, Cato Institute
New York Post, 09/10/07

The American Cancer Society announced recently that it will spend its entire advertising budget next year not on urging Americans to stop smoking or get mammograms, but on campaigning for a government takeover of the U.S. health-care system. This is perverse: It's hard to imagine anything worse for cancer patients than government-run health care. READ MORE

Sick Sob Stories
John Stossel, 20/20
The Wall Street Journal, 09/13/07

Patients in countries with government-run health care can't get timely access to many basic medical treatments, never mind experimental treatments. That's why, if you suffer from cancer, you're better off in the U.S., which is home to the newest treatments and where patients have access to the best diagnostic equipment. People diagnosed with cancer in America have a better chance of living a full life than people in countries with socialized systems. Among women diagnosed with breast cancer, only one-quarter die in the U.S., compared to one-third in France and nearly half in the United Kingdom. READ MORE

Health Coaches Help Workers, Save Companies Cash
Harry Wessel
Orlando Sentinel, 09/10/07

Company-sponsored health coaches are on the upswing nationwide, benefits experts say, as businesses — especially large ones — search for new ways to slow the fast-rising cost of their employees' health insurance. MORE

Prescription Drugs

Fake!
Roger Bate, American Enterprise Institute
The American, September/October 2007

The business of counterfeit medicines is exploding, and it?s killing poor Africans. AEI's Roger Bate took a dangerous trip to Nigeria to see for himself. READ MORE

Medical Quackery
Robert Goldberg, Center for Medicine in the Public Interest
The Washington Times, 09/07/07

There is a movement in medicine called comparative effectiveness. Quite simply, the comparative effectiveness crowd claims that, opposed to drug companies, it is guided purely by scientific and economic facts about which medicines are more effective for the money. And they only have our better health in mind — no matter what it costs. Except that what guides these decisions smells more like bias or fear, not science. And both can kill. READ MORE

State Issues

Sinking SCHIP: A First Step toward Stopping the Growth of Government Health Programs
Michael F. Cannon
Cato Institute, 09/13/07

Rather than expand SCHIP, Congress should (1) make private health insurance more affordable by allowing consumers and employers to purchase less expensive policies from other states, and (2) fold federal Medicaid and SCHIP funding into block grants that no longer encourage states to open taxpayer-financed health care to nonneedy families. With more Americans able to afford private insurance and no incentive for states to expand government programs beyond the truly needy, federal and state governments could reduce spending on those programs. READ MORE

Health Systems Abroad

Most Canadians Scoff at Portrayal of Their 'Health Care Paradise'
Sally Pipes, Pacific Research Institute
The San Diego Union-Tribune, 09/09/07

Those who have seen "SiCKO" can't be faulted for thinking America's northern neighbor offers its citizens a paradise of free medical care. The truth is that Canada's health care system is heartless and uncaring. I know, because I've seen it firsthand. In 1999, my uncle in Vancouver was diagnosed with non-Hodgkin's lymphoma. I began investigating possible treatments, hoping something other than chemotherapy could help. I discovered that the new drug Rituxan had shown enormous success in fighting the disease. But it wasn't approved in Canada, so it was unavailable to my uncle. Had he lived in America, he might have survived. READ MORE

Patients Suing Province Over Wait Times
Tanya Talaga
Toronto Star, 09/06/07

Two Ontario patients who had brain tumours removed in the United States because they say they couldn't get quick treatment in Canada are suing the provincial government over what they claim are unjustly long wait times for medical care. READ MORE

UPCOMING EVENTS:

7th Annual Physician Hospitals of America Conference
Physician Hospitals of America Event
September 13 – 15, 2007
Las Vegas, NV
Grace-Marie Turner will participate in a panel discussion titled "The Future of Healthcare in America" on Friday, September 14.

Healthcare Reform: The Economics of "Pay or Play" Employer Mandates
Cornell University Symposium
Friday, September 14, 2007, 1:00 p.m. – 5:00 p.m.
Washington, DC

Whose Body is it Anyway? Sick in America
ABC News 20/20 Special featuring Grace-Marie Turner
Friday, September 14, 2007, 10:00 p.m. ET

Creating a 21st Century Medicaid System
Center for Health Transformation Event
Tuesday, September 18, 2007, 9:30 a.m. – 6:00 p.m.
Washington, DC

Is SCHIP Expansion a Step towards Socialized Medicine?
The Urban Institute Debate with Galen's Grace-Marie Turner and Urban's Stan Dorn
Wednesday, September 19, 2007, 9:00 a.m. – 10:00 a.m.
Washington, DC

Free Market Cure: Why Government Health Care Isn't the Answer
Independence Institute Event
Wednesday, September 19, 2007

The Convergence of Health and Wealth
Lighthouse1 Webcast
Wednesday, September 19, 2007, 2:00 p.m. ET

Reforming Care Outside the Clinic: Better Outcomes Through Smart Policy, Patients, and Providers
The Atlantic and Philips Breakfast Panel Discussion
Thursday, September 20, 2007, 7:45 a.m.
Washington, DC
For more information, contact Amy Tsuchitani at 202-266-7449 or atsuchitani@theatlantic.com.

Visions for Health Reform
George Washington University School of Public Health and Health Services Event
Thursday, September 20, 2007, 12:00 p.m. – 2:00 p.m.
Washington, DC

Investing in Health: Aligning Incentives to Redirect the Medical Arms Race
National Institute of Health Policy Event
Thursday, September 20, 2007, 12:00 p.m. – 2:00 p.m. (Lunch included)
Minneapolis, MN

 


Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at www.galen.org.

If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please send an e-mail message to galen@galen.org.

The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.

SHARE THIS ARTICLE

About the author

Premiums for job-based health insurance increased by 6.1% this year, the lowest rate of increase since 1999, the Kaiser Family Foundation reported this week. Also, the number of firms offering high-deductible plans increased by nearly 30%, and premiums for these plans were the lowest of all plans while employers made generous contributions to spending accounts for their workers.

Pop quiz: How many of you saw that as the lead of yesterday's reports? Not many.

The lead we often read was reflected in The New York Times story that said: "The cost of employer-sponsored health insurance premiums has increased 6.1 percent this year, well ahead of wage trends and consumer price inflation?the modest slowdown in insurance inflation mainly reflects cutbacks in coverage by many health plans, which have found ways to make employees pay more for their care."

This chart and its caption show the bias in coverage of health care issues.

This is a serious drop in premium costs, yet the big story seems to be that costs are still rising at twice the rate of inflation.

And reporters continue to get the story wrong: The Washington Post reported: "The average annual premium for family coverage amounts to $12,106 in 2007, of which $3,281 is paid by the worker. (The employer picks up the rest.)"

Wrong.

All of the health premium is part of the employee's compensation package. But only about a fourth of it is visible to the worker because the employer writes the check for the rest out of the worker's pre-tax compensation.

And the Post points out that, "The $12,106 average cost of family coverage this year is roughly equivalent to a year's salary for a full-time worker earning the minimum wage, which is $12,168."

So how on earth do people think that an employer mandate ever could work since it would force employers to virtually double the wages of these workers? Job loss would be guaranteed.

 

Some news about high-deductible plans from this survey of about 2,000 employers:

 

  • Workers in these plans had the lowest premiums of any plans (HMOs, PPOs, POS plans), averaging $10,693 this year. (PPOs were the highest at $12,443.)

     

  • Workers in Health Reimbursement Arrangement plans receive an average contribution to their spending account from their employer of $915 for single coverage and $1,800 for family coverage.

     

  • 88% of these plans covered preventive services outside the deductible.

     

  • The number of workers in high-deductible plans increased from 2.7% last year to 3.8% this year, and while still small, this is nearly a 30% increase.

The number of workers in this survey in high-deductible plans may be too small to have an overall impact on spending trends. But employers are offering consumer-directed options in many other ways than simply the HSAs and HRAs measured in this study. These new tools to engage employees as partners in managing their health costs may be a reason for the lower cost trends. That is the study we really need.

For some workers, the combination of the less-expensive, high-deductible insurance, the employer contribution to spending accounts, and access to preventive care may reflect the best choice.

***********

And it is important to remind ourselves that employment-based health insurance still is much more expensive than the average individual policy. eHealthInsurance, our favorite on-line broker, reported that for 2006 (the latest year for which figures are available):

 

  • The average annual premium for individual health insurance was $1,776 in 2006 (compared to $4,479 for job-based coverage in 2006).

     

  • The average family premium was $4,128 (compared to $12,106 for job-based plans).

     

And, not surprisingly, many of these buyers are opting for higher-deductible plans to get the lower premiums for their insurance coverage.

***********

But this isn't stopping the other side from criticizing this option. A new study on "Health Savings Accounts and High-Deductible Health Plans" for The Bell Policy Center in Colorado does just that. It says that HSAs "leave many lower-income workers exposed to high out-of-pocket expenses they may not be able to afford…[and] are by no means a solution to the major problems in today's health care system."

Good grief. We've been saying all along that they are one tool to begin to help moderate health costs, and the Kaiser study shows that is happening.

But unfortunately, this Bell Center study will be used by the the Colorado Blue Ribbon Commission for Health Care Reform in its efforts to develop a grand-scheme health reform plan for the state. You can predict the outcome.

I will be speaking in Colorado next month to try to set the record straight. Here is a talk I gave to about 80 state legislators in Ohio last week to encourage them to consider more free-market options.

Grace-Marie Turner

RECENT NEWS ARTICLES AND STUDIES:

Market Forces in Health Care

Caring for the Vulnerable
Health Affairs, September/October 2007

The latest issue of Health Affairs focuses on vulnerable populations, factors that contribute to poor health, how to improve immigrant care, and policies to address disparities. It includes papers by Wharton Professor Mark Pauly, AEI's Tom Miller, and Harvard Professor Kate Baicker. READ MORE

Making a Difference in Differences for the Health Inequalities of Individuals
Thomas P. Miller, American Enterprise Institute
Health Affairs, September/October 2007

Policy interventions should focus on the degree to which health conditions are persistent, avoidable, and treatable. Assistance should be targeted to people who are at greater risk for such conditions amid the most pronounced gaps between their available resources and likely economic needs. The highest-yield interventions should address prenatal and early childhood care and reformation of destructive lifestyle practices. Improving outreach, education, convenience of access, and service delivery represents a more important factor than expanding the level and scope of insurance coverage. Vulnerable people are better served by more pluralistic social processes that facilitate, but do not mandate, more effective choices and trade-offs. READ MORE

Getting Old
James C. Capretta, Ethics and Public Policy Center
National Review Online, 09/13/07

Senator Hillary Clinton spoke this month before a meeting of the Alliance for Retired Citizens, and said she saw no reason to change Social Security and Medicare. Senator Clinton may promise "no changes in benefits," but her plan has costs as well. In the case of Social Security, there will be a tax increase, and most likely the middle class will pay it. And to keep Medicare costs from rising, she would allow the government to tell some beneficiaries they cannot get the care they seek. Presented with this information, perhaps the public will be open to more sensible reforms. READ MORE

Cancer Society's Deadly Medicine
Michael D. Tanner, Cato Institute
New York Post, 09/10/07

The American Cancer Society announced recently that it will spend its entire advertising budget next year not on urging Americans to stop smoking or get mammograms, but on campaigning for a government takeover of the U.S. health-care system. This is perverse: It's hard to imagine anything worse for cancer patients than government-run health care. READ MORE

Sick Sob Stories
John Stossel, 20/20
The Wall Street Journal, 09/13/07

Patients in countries with government-run health care can't get timely access to many basic medical treatments, never mind experimental treatments. That's why, if you suffer from cancer, you're better off in the U.S., which is home to the newest treatments and where patients have access to the best diagnostic equipment. People diagnosed with cancer in America have a better chance of living a full life than people in countries with socialized systems. Among women diagnosed with breast cancer, only one-quarter die in the U.S., compared to one-third in France and nearly half in the United Kingdom. READ MORE

Health Coaches Help Workers, Save Companies Cash
Harry Wessel
Orlando Sentinel, 09/10/07

Company-sponsored health coaches are on the upswing nationwide, benefits experts say, as businesses — especially large ones — search for new ways to slow the fast-rising cost of their employees' health insurance. MORE

Prescription Drugs

Fake!
Roger Bate, American Enterprise Institute
The American, September/October 2007

The business of counterfeit medicines is exploding, and it?s killing poor Africans. AEI's Roger Bate took a dangerous trip to Nigeria to see for himself. READ MORE

Medical Quackery
Robert Goldberg, Center for Medicine in the Public Interest
The Washington Times, 09/07/07

There is a movement in medicine called comparative effectiveness. Quite simply, the comparative effectiveness crowd claims that, opposed to drug companies, it is guided purely by scientific and economic facts about which medicines are more effective for the money. And they only have our better health in mind — no matter what it costs. Except that what guides these decisions smells more like bias or fear, not science. And both can kill. READ MORE

State Issues

Sinking SCHIP: A First Step toward Stopping the Growth of Government Health Programs
Michael F. Cannon
Cato Institute, 09/13/07

Rather than expand SCHIP, Congress should (1) make private health insurance more affordable by allowing consumers and employers to purchase less expensive policies from other states, and (2) fold federal Medicaid and SCHIP funding into block grants that no longer encourage states to open taxpayer-financed health care to nonneedy families. With more Americans able to afford private insurance and no incentive for states to expand government programs beyond the truly needy, federal and state governments could reduce spending on those programs. READ MORE

Health Systems Abroad

Most Canadians Scoff at Portrayal of Their 'Health Care Paradise'
Sally Pipes, Pacific Research Institute
The San Diego Union-Tribune, 09/09/07

Those who have seen "SiCKO" can't be faulted for thinking America's northern neighbor offers its citizens a paradise of free medical care. The truth is that Canada's health care system is heartless and uncaring. I know, because I've seen it firsthand. In 1999, my uncle in Vancouver was diagnosed with non-Hodgkin's lymphoma. I began investigating possible treatments, hoping something other than chemotherapy could help. I discovered that the new drug Rituxan had shown enormous success in fighting the disease. But it wasn't approved in Canada, so it was unavailable to my uncle. Had he lived in America, he might have survived. READ MORE

Patients Suing Province Over Wait Times
Tanya Talaga
Toronto Star, 09/06/07

Two Ontario patients who had brain tumours removed in the United States because they say they couldn't get quick treatment in Canada are suing the provincial government over what they claim are unjustly long wait times for medical care. READ MORE

UPCOMING EVENTS:

7th Annual Physician Hospitals of America Conference
Physician Hospitals of America Event
September 13 – 15, 2007
Las Vegas, NV
Grace-Marie Turner will participate in a panel discussion titled "The Future of Healthcare in America" on Friday, September 14.

Healthcare Reform: The Economics of "Pay or Play" Employer Mandates
Cornell University Symposium
Friday, September 14, 2007, 1:00 p.m. – 5:00 p.m.
Washington, DC

Whose Body is it Anyway? Sick in America
ABC News 20/20 Special featuring Grace-Marie Turner
Friday, September 14, 2007, 10:00 p.m. ET

Creating a 21st Century Medicaid System
Center for Health Transformation Event
Tuesday, September 18, 2007, 9:30 a.m. – 6:00 p.m.
Washington, DC

Is SCHIP Expansion a Step towards Socialized Medicine?
The Urban Institute Debate with Galen's Grace-Marie Turner and Urban's Stan Dorn
Wednesday, September 19, 2007, 9:00 a.m. – 10:00 a.m.
Washington, DC

Free Market Cure: Why Government Health Care Isn't the Answer
Independence Institute Event
Wednesday, September 19, 2007

The Convergence of Health and Wealth
Lighthouse1 Webcast
Wednesday, September 19, 2007, 2:00 p.m. ET

Reforming Care Outside the Clinic: Better Outcomes Through Smart Policy, Patients, and Providers
The Atlantic and Philips Breakfast Panel Discussion
Thursday, September 20, 2007, 7:45 a.m.
Washington, DC
For more information, contact Amy Tsuchitani at 202-266-7449 or atsuchitani@theatlantic.com.

Visions for Health Reform
George Washington University School of Public Health and Health Services Event
Thursday, September 20, 2007, 12:00 p.m. – 2:00 p.m.
Washington, DC

Investing in Health: Aligning Incentives to Redirect the Medical Arms Race
National Institute of Health Policy Event
Thursday, September 20, 2007, 12:00 p.m. – 2:00 p.m. (Lunch included)
Minneapolis, MN

 


Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at www.galen.org.

If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please send an e-mail message to galen@galen.org.

The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.

SHARE THIS ARTICLE

About the author