2010 September 02 Thursday
Companies Stopped Absorbing Rising Health Costs

All rising health care costs are now being passed thru to employees. This means rising health care costs are becoming much more transparent and far more likely to curtail demand.

In contrast to past practices of absorbing higher prices, some companies chose this year to keep their costs the same by passing the entire increase in premiums for family coverage onto their workers, according to a new survey released on Thursday by the Kaiser Family Foundation, a nonprofit research group.

Workers’ share of the cost of a family policy jumped an average of 14 percent, an increase of about $500 a year. The cost of a policy rose just 3 percent, to an average of $13,770.

A 3% rise to $13,770 means it rose from $13,368.93. Okay, so then the total cost rose by about $400. That's less than the $500 increase experienced by employees. So then did employers actually pay less?

This is a first.

"It's the first time I can remember when employers have coped with costs by shifting it all to workers," said Drew Altman, the Kaiser Family Foundation's president and chief executive.

Rising deductibles are one of the ways that employers are shifting costs onto employees. The result of this shift toward making employees directly pay more health care costs is unsurprising: A pause in demand growth. See my post Medical Spending Finally Stalls.

I think we've entered a new era in America where health care spending will rise much more slowly for those under age 65.

Share |      By Randall Parker at 2010 September 02 09:07 PM  Economics Health

sg said at September 3, 2010 2:04 PM:

The cost has to increase at the point of service. Increased copays etc.

kurt9 said at September 3, 2010 3:06 PM:

I think its fine. Being self-employed, I've always had to pay for all of my health insurance, with after tax income. I see no reason why an employee of someone else should not have to do the same. Its time to put everyone on a level playing field.

Wolf-Dog said at September 3, 2010 5:58 PM:

Companies have more cash than ever, and the majority of working people have less cash then before. It thus follows that the profits of the medical equipment companies will suffer as a result.

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