Employer Healthcare Costs Jump to $20,000 - Not Inflation?

-edited

A poll of employers by Kaiser Family Foundation found premiums rose 5% for family plans, topping $20,000 for 1st time.

The Cost of Employer-Provider Healthcare Just Topped $20,000. Medical costs are spiraling out of control but supposedly this is not inflation.

The average total cost of employer-provided health coverage passed $20,000 for a family plan this year, according to a new survey, a landmark that will likely resonate politically as health care has become an early focus of the presidential campaign.

Annual premiums rose 5% to hit $20,576 for an employer-provided family plan in 2019, according to the yearly poll of employers by the nonprofit Kaiser Family Foundation. On average, employers bore 71% of that cost, while employees paid the rest.

“It’s a milestone,” said Drew Altman, chief executive of the foundation. “It’s the cost of buying an economy car, just buying it every year.”

At Elkay Manufacturing Co., a closely held company in Oak Brook, Ill., with around 1,500 U.S. employees, the cost of coverage has been going up around 5% to 6% a year, said Carol Partington, senior manager of total benefits. For 2019, the company introduced its first high-deductible plan, and put in place a new $250 penalty for employees who get imaging scans without checking prices through a price-transparency program.

Medical Care Services vs CPI

Medical Care Services vs CPI Percent Change From Year Ago

Inflation Understated

Those charts look ominous and they are. But they dramatically understate the problem.

The reason is in plain sight. The BLS measures the CPI, the Consumer Price Inflation.

Employer costs are not included, anywhere.

The Fed's favorite measure of inflation, PCE, Personal Consumption Expenditures, does not look at employer costs either.

Self-Insured

The BLS reports a 4.3% year-over-year rise in medical care costs. It arrives at that figure by excluding all employer increases, then it averages prices paid by the self-insured with those on Medicare.

Those buying their own insurance will tell you costs are up as much as 100%, not 4%.

Percentage of Healthcare Uninsured Jumps From 8.0% in 2017 to 9.1% in 2019

On September 16, I reported the Percentage of Healthcare Uninsured Jumps From 8.0% in 2017 to 9.1% in 2019.

Here is one of many charts.

The young and healthy are opting out. And why shouldn't they?The Obamacare design forces them to overpay.

It’s just too expensive,” said Grace-Marie Turner, president of the Galen Institute, a public-policy free-market research organization. People are siphoning themselves off.

Those over 65 are the most likely to have insurance. Their costs artificially lower reported inflation for every group but themselves.

Wage Growth for Men About 1/4% Per Year Since 2000, Women About 1/2% Per Year

Despite soaring medical care costs, please note that Wage Growth for Men About 1/4% Per Year Since 2000, Women About 1/2% Per Year.

Bear in mind, that chart of real (inflation-adjusted) wages assumes you believe the CPI.

Some readers challenge the chart based on advancement. It's a false challenge. Those are "median" wages. By definition, 50% make more and 50% less no matter what the starting point.

Don't confuse nominal wages with real wages. The median nominal wage was $568 in 2000. It is now $911. That's a 60% wage hike in nominal terms. Inflation took most of it.

Home Prices Another Measure of Inflation Under-Reporting

Last Chance for a Good Price

The Last Chance for a Good Price Was 7 Years Ago.

Home prices are not in the CPI. Only rent is.

Those who want to buy a home quickly discover wage growth has not kept up with home price growth.

American Dream

In case you missed it, 68% of Millennial Homeowners Regret Buying a Home

The top regret "too costly to maintain".

Meanwhile, the Fed is concerned about the lack of inflation.

What a sorry joke.

Mike "Mish" Shedlock

Comments (177)
No. 1-31
Harry-Ireland
Harry-Ireland

Holy Moses, Mish This is insane! This has to be rampant capitalism, greed or corruption. Pick your poison. And it ties into your previous article regarding the fallen behind wages.

THX1138
THX1138

I'd be curious to see a chart of medical costs vs college costs vs CPI (ex: healthcare and education)...

avidremainer
avidremainer

There are two things I don't understand. 1) Why does American Industry and Commerce tolerate these needless costs? 2) Why does anyone defend the Rentiers and price gaugers that are your HMOs?

Latkes
Latkes

Worst system in the developed world. By far.

SMF
SMF

What more people need to comprehend is cost of regulation and how it ties to average pay. If a company did not have to pay healthcare and other taxes, then they could pay their workers more.

You can also see how prices go up the more government gets involved in an industry, like housing, healthcare, and education.

Casual_Observer
Casual_Observer

That $20000 is included as a benefit by some employers. Employers who don't tout this are doing themselves a disservice. I've had so many people in my field who joined a company only to find out it was some high deductible plan where they had to foot most of the bill even though their "salary" may have been more. It wasn't enough to offset the increase in out of pocket costs.

2banana
2banana

And yet, medical procedures not covered by insurance and/or government has had prices drastically go down over time even with technologies improving (lasik, boob jobs, facelifts, liposuction, etc.).

Obama promising to lower health care premiums by $2500 with Obamacare...

Jojo
Jojo

Why your employer-sponsored insurance may ultimately not be good for you September 9, 2019 8.53am EDT Author - Dana Goldman - Leonard D. Schaeffer Chair and Distinguished Professor of Public Policy, Pharmacy, and Economics, University of Southern California https://theconversation.com/why-your-employer-sponsored-insurance-may-ultimately-not-be-good-for-you-121859

Country Bob
Country Bob

The Kaisser "study" is partially recognizing a disaster way too late.

Healthcare costs in major cities along the two coasts (where the majority of the population live) are going up a LOT more than 5%. Mish tried to play this 5% number off as an "average", but that is way off the mark. Health care costs are skyrocketing 15-20% per year every year in major cities... and only a fool would believe the geographic middle of the country has prices falling fast enough to get a 5% average overall.

Obamacare is an epic failure, as lots of people said it would be. After paying a con-man from MIT $500,000 to design the thing behind closed doors, Pelosi exempted herself and Harry Reid and Barrack Obama. It was good enough for the masses, but not good enough for our public servants who had actually read the turd.

As many other commenters have pointed out in this and other posts -- pretty much every industry with heavy US government involvement has skyrocketing costs. @SMF cited housing, health care, and education. Let's not talk about the price of aircraft carriers and missiles and other military toys.

I wonder how many people with employer health insurance understand how much this cuts their take home pay? Employers don't care how much your salary is versus your benefits -- employers look at your total compensation. Every extra dollar that Obama steals to fund his free sh!t army is a dollar out of your take home pay.

True health care costs, including premiums and deductibles and out of network gouging is far far far worse than what Mish or this Kaisser "study" suggest.

Lock Obama and Pelosi up for fraud. Enron and Goldman Sachs would never have gotten away with this crime

Country Bob
Country Bob

PS @Mish Editor -- would you please stop this bull sh!t of telling us what percentage supposedly have or don't have "health insurance"?!?!? People need affordable care, not affordable insurance. Its like Obama brainwashed you into focusing on the wrong metric.

Tell us how many people can afford to get sick. That is the important number.

And make sure you factor in deductibles and co-pays and out-of-network scams .... even the folks on Medicare get a shock when they realize how much they have to pay themselves even for a simple procedure. Doctors complain that Medicare pays 15 months late, and even then it doesn't actually pay what it is supposed to.

Mish
Mish

Editor

"True health care costs, including premiums and deductibles and out of network gouging is far far far worse than what Mish or this Kaisser study suggest."

Isn't that exactly what I said?

Tony Bennett
Tony Bennett

"Meanwhile, the Fed is concerned about the lack of inflation.

What a sorry joke."

...

Yes, they live in a cloistered 6 figure world (and 7 figure as soon as they leave govt service). I doubt very many, if any, know the price of things out in the real world.

I recall Bush Sr's infamous moment in a debate with Clinton - no clue on a price of a gallon of milk.

Casual_Observer
Casual_Observer

And news today that Kaiser and unions came to an agreement to start paying kaiser workers across the country like the inflated bay area salary they have to give to keep people there from leaving bc of the high cost of living. If you think health care is expensive now think again. Unions threaten strikes to all hospitals and systems across the country. They think they should get paid more.

thimk
thimk

no wonder political orientation is shifting more the left. And elections on board and no mention of healthcare costs. anyways walmart offers a private sector solution .

Herkie
Herkie

Mish, you of all people should know by now never to use the "i" word on the net. I bitch about inflation all the time, no matter where I post, no matter the forum, it is as if the GRU has the word flagged for immediate attention, within minute nasty people attack and insist that anyone saying there is any inflation is just full of %$£& and should do things like take some meds or boil one's own head.

It does not matter that rents I have to pay are up on average more than 20% PER YEAR since the 2013/14 lease because that is NOT inflation. It does not matter that my auto insurance is up 300% because that is not inflation. It does not matter that groceries are up 50% in the same period because you guessed it, that also is not inflation. Even to the smallest items, like I went to buy a new BIC lighter the other day when mine crapped out, what was 69 cents 5 years ago is now over $2 but hey, not inflation.

Medical costs? Double digit (non) inflation for decades on end. Tuition? So much (non) inflation that student debt is now over $1.7 trillion and skyrocketing. House prices? CNBC had a good article today, they report that new home prices considered "entry level" was recently $200k but due to (non) inflation is now considered to be over $300k. New iPhone? My new iPhone in 2014 was $400, a new iPhone in 2017 over $1,100 but of course it is a better phone so well worth nearly triple with taxes right? And no matter what else that increase is NOT INFLATION! New cars? Now averaging over $37,000 and for the first time ever there is a pickup truck being sold at over 100k, but please don't call it inflation or someone will call you a dumb ass. A loaf of decent seeded brown bread? Like Mike's is now $6 when the most I ever paid for bread 5 years ago was $2.50, it must be the quality right? Or, maybe it is the nutritional value that allows them to say the price is actually lower when you account for the superiority of the product, as long as it is not called inflation the BLS and Fed don't care.

On and on, in fact the only thing not explosively higher is gasoline and milk and milk is heavily subsidized.

Some of your most attentive readers here say that very thing though I doubt if they will go up against the Great and Mighty OZ, Mish, the man behind our curtain here at MoneyMaven.

And right on schedule we will be hearing an announcement October 10 that will say we are getting a 1.6% COLA for 2020, I will be making arrangements to live in my car on a near perfectly 50th percentile take home income.

numike
numike

Kaiser healthcare workers plan for nation's largest strike since 1997 Union leaders call for 80,000 Kaiser Permanente workers to be ready to strike on or after Oct. 1 https://www.salon.com/2019/09/15/kaiser-healthcare-workers-plan-for-nations-largest-strike-since-1997/

Realist
Realist

Non-Americans like Harry-Ireland, avidremainer, and myself continue to be astounded at the mess called US Health Care. It costs twice as much as Health Care in other developed countries, does not cover everyone, and has much poorer outcomes. Americans constantly complain about their system, yet refuse to look into how other countries do much more for much less. The unwillingness of Americans to realize that other countries do something better than they do, dooms them to a couple of decades of continued misery while they continue to tweak their horrible system, looking for an answer. As outsiders, we can only sit back and watch this slow-motion train wreck. As I often say, the US will eventually move to a single payer system, but not before they try everything else.

Curious-Cat
Curious-Cat

What are factors in the insurance cost increases? Intensity - more and more services demanded by those insured, more new treatments available, older average populations need more care. Docs, hospitals and drug companies increase their charges. Services times cost = total cost equal insurance premiums less profit for the insurance companies.

If you want to cut healthcare costs, you have to ask the question of where will the cuts come from - fewer services? lower payments to hospitals? docs? or drug companies? All scream blood blue murder and yell about decreases in quality and how research will be thwarted. So prices keep rising. This has been going on since the 1980s. At that time the cost increase saviors were supposed to be the HMOs. We know how that worked out, right?

Mish
Mish

Editor

"I'd be curious to see a chart of medical costs vs college costs vs CPI (ex: healthcare and education)..."

I have a chart somewhere - I will try to dig it up. Let me tell you this: I went to college in 1976 The cost of tuition for a semester was $250 for a degree in engineering at the University of illinois, a very respected school for engineering

Now: "The 2019 undergraduate tuition & fees of University of Illinois at Urbana-Champaign (UICU) are $15,094 for Illinois residents and $31,664 for out of State students."

From $500 per year to $15,000 per year since 1976. I financed my way through school playing poker. Hard to believe that is possible today.

Everything government touches goes haywire.

Mish

Carl_R
Carl_R

Obviously the employer costs aren't included in the CPI, nor should they be. Why not? Because the CPI represents costs to the individual. So, where to increased costs to companies show up? They can show up one of two ways. First, companies can give lower raises, which will show up in reduced wage growth. The second choice that companies have is to raise prices to cover increased costs, and if they choose that, it will show up in CPI, after a delay.

Greggg
Greggg

Medical care costs are almost totally 3rd party transactions... combine that with excessive testing by doctors to avoid liability costs and you have all the ingredients for a financial fiasco. Nothing mysterious there... at all.

Aaaal
Aaaal

Thanks Mitt Romney Care. And thanks Obama for signing it into law.

JohnFromNE
JohnFromNE

Look at the "Health Insurance" subcomponent of CPI. Up over 18% y/y. This is just pure greed on the part of health insurance companies. They are ruining our economy. Makes socialist, Bernie Sander's, call for outlawing health insurance companies seem reasonable.

dbannist
dbannist

It is insane, and unnecessary. I am a member of a healthcare co-op. We are treated like cash customers, get the cash price. I have a 500 deductible in the co-op but everything, and I mean everything but dental and vision after that is covered. It's specifically allowed by the ACA.

I pay 450 for a family of 5 and coverage goes up to 2 million dollars.

I cannot imagine why health care costs 20k a year....except for the burden of paperwork, which is massive.

Health care doesn't need to cost 20k a year. Co-ops have proven that a capitalistic model works better than anything the government touches.

As far as I know, the co-op model is the only purely non-socialistic model in the USA today that operates as a cash customer, is fully insured, and is a product of 100% choice.

Herkie
Herkie

At least where I live in rural southern Oregon rent has not climbed by 35% since 2012. It has outright doubled, at least in theory, in fact you have to have a lottery winners luck to find anything available for less than 200% of the 2012 rental price. My rent budget in 2013 here was $725, I might get lucky and find something I like at a little less, or I might have paid a bit more for something special. But, $725 was my guide price. And, checking Craigslist daily gave me on average over 400 units to pick from.

2019 same priorities to size and amenities, neighborhood, I put in $700-$900 get zero returns. None. In fact I got really lucky in Las Vegas when I wanted to move back here, for health reasons, checking constantly, looking at property managers websites, I found a place for $1,300 but, it was built in 1981, prior to the invention of insulation, I go to use the hot water at the kitchen sink, it takes a full minute for the water to run hot. The floor plan blows, there are enough electric outlets for life prior to electronics, but almost every outlet needs power strips for 2019 life. It was built with a fireplace but modern air quality standards mean you cannot use the fireplace when you need to, when it is actually cold. The county has obscure rules about if they can see smoke you are breaking the air quality standards and will get fined.

To live as I lived in 2012 or 13/14 I would need to have an annual disposable income of about $70k per year. I am at $50k, and that is 8.6% more than I had in 2013/14, because that is how much (non) inflation the government says we have had since then. My income is from the US Treasury as 100% disabled vet, that pays 3,056 per month. Tax exempt. Fortunately I also get $1,065 in SS also exempt. But I am not allowed to work in any capacity, not even volunteer or I will lose $21,300 of that income.

That was middle class, well for a single person it bordered on middle class, just not that long ago. But now it just is not. Mind you I am at the near perfect median of households at the 50th percentile (in disposable income), but it does not pay anywhere near enough for an actual middle class life. buying a house is so out of the question it is not even funny. Even with veteran benefits I will not live long enough to ever buy another house. Just getting through the month requires a payday loan half the months of the year. I have almost no debt, a small used car loan and a credit card with a $1,500 limit I pay off every month. I own no toys, I have no living relatives, I do not do drugs legal or otherwise. I don't gamble more than a few bucks a month on lottery, and I only do that because that is the price you pay in America now to dream of a secure life.

How many of you remember our beloved Lucille Ball who paid for making a movie she starred in called Stone Pillow? In her entire career she never did better or more important work. It was made in 1985. It was about a bag woman that was on social security that slept in doorways, homeless on the streets. In the late sixties old people were portrayed as eating cat food, it was not without basis. It was not till 1972 that the congress put social security (and now VA benefits) on auto pilot adjusting the increase for the CPI. Before that they had never increased benefits between the start of the program (1935) and 1950. They adjusted it again in 1952 by doubling the benefit, that was how meaningless SS had got.

"There were subsequent increases in 1954, 1959, 1965, 1968 and each year from 1970 to 1972." Notice the gaps? The only reason the politically divided congress ever gave any raises at all was when politicians feared for reelection and even then they only raised pay to poverty levels again.

So, they passed a law, it required the US government to track prices called the CPI or Consumer Price Index. They made the law so that neither side of the political isle would get burned by the plight of elderly eating cat food. It established a COLA increase so that politicians could not be accused of playing political football with social security pay levels.

Now, the baby boomers who paid so much in all their lives and pushed the government surplus to almost 6 trillion dollars in intergovernmental holdings are said to be leeches upon the treasury, they have only known about us since we were born starting in 1946. Now it is going on 2020, I was born in 1958 and that is late-ish in the baby boom. All my life I have been at the end of a very long line of too many people for too little resources.

But, as a disabled vet I have a contract with you Mr. Taxpayer. I put my life on the line, I gave up my youth and my rights for you when I was 17, I had no right to sue if you intentionally harmed me, or were negligent. Look up the Feres Doctrine.

Now, the weight of CPI increases is too much for at least the right (and likely for the left) so your government simply lies about it.

In the seventies they had to actually send out people to supermarkets to buy a basket of goods, compile prices in ledgers on paper, average them, do a lot of math, and they just outright guessed at housing costs.

Now, they have the technology to demand from grocery chains what prices are charged/paid so why do they not do that? We read every single day on sites like CNBC about the price of housing, we have private companies that calculate it to the penny, so why is that data not used? We have the ability to track a perfect sample of payments from selected recipients of prices paid by them and yet that is not used. In fact the use of the old 70's COLA and BLS data for the CPI is so out of date we are right back at the point where COLA's are a political football in which the right is saying that the CPI overestimates inflation and we should get no raises at all. In the meantime we retired/disabled sink back into poverty.

Really, you should be ashamed of your own greed. Or you should work to change this. 0000000000000000000

Duncan Burns
Duncan Burns

Don't worry, public health insurer executives have only cashed in over $2 BILLION in share sales since ACA passage. Congress Members, their staff, and families are exempt thanks to a 2013 OPM memo calling each individual congressional office a "small business". This made them eligible for taxpayer subsidies via DC HealthLink!

EAT CAKE!

KidHorn
KidHorn

We always focus on insurance costs. People believe insurance costs are high because the insurance companies make a lot of profit. Not true. My insurance company is a non profit and yet my costs are still high. The reason insurance costs are high is because health care costs are high. But, no politician will ever tackle that since they're beholden to the industry on both sides of the aisle.

In the US we pay far more for health care than other nations because insurance companies and medicaid are required by law to pay whatever is charged. One of the reason health care costs are lower in other countries is because they won't pay for something if the cost is too high. And pharmaceutical companies are better off selling things at 10% of US costs instead of getting nothing. In some ways their costs are supplemented by US citizens.

There needs to be caps on what companies can charge in exchange for patent protection.

leicestersq
leicestersq

Oh what to do about medicine? It is a great conundrum.

If there is no state intervention, then the market will allocate resources and the very poorest will find that they cannot afford anything but the most basic of healthcare. The political fall out is more than enough to keep free marketeers out of power permanently.

Now if the state intervenes, two things happen. Firstly everyone who has to pay taxes for to the state find that they get poorer. Then the state throws those resources at the medical sector, and what happens when demand rises? Well prices go up.

It seems to me as if Obamacare mostly just have prices going up and the game ends there. In Europe, a single supplier of healthcare does allow prices to be fixed to some extent, but at a cost of waiting lists and a more limited portfolio of treatment.

Rising life expectancy adds to the total cost whichever system you employ.

Drugs companies also get to make a killing, but of course they dont develop things to cure, only to ameliorate as long as you keep taking the drugs. Sometimes the drugs simply dont work despite what it says on the packet, and other times the drugs make things worse.

I cant see how we can get any sort of system to work that well, at least until we can develop a super-intelligence which is incentivised to sort all of this out.

Ted R
Ted R

More people=higher healthcare cost. Add into the mix a rapidly aging population and you have constant increases in healthcare cost.Just the way it is.

Sechel
Sechel

the cpi is a nefarious index. nobody is fudging the numbers but the calculations and algorithms have been engineered to provide nothing of value. not sure what the CPI is even supposed to tell me.

astroboy
astroboy

Anecdotal story but probably still illuminating....

My dad was an MD. Started practicing in 1965, malpractice insurance was $700 a year. Retired in 1990, malpractice was $130K a year. Both those numbers were average for his location and specialty.

He retires, but by state law can be sued for malpractice for 18 years. Malpractice was $90K a year. Even if he died, which he did, his estate could be sued for malpractice. So, he had to make enough in his career to be able to pay $90K out of pocket for nearly two decades, even if the stock market tanks, etc.

In addition, towards the end he ordered alot of tests and procedures that were really not necessary to avoid malpractice suits.

As he said, "I don't pay my malpractice insurance, my patients do".

So, follow the money, I guess.

I was told by an airline pilot a couple decades ago small airplane manufacturers could be sued for 21 years for bad engineering, after the FAA approved the designs. For two or three years no small private plane was made in the US, the companies all went out of business, essentially. When it was reduced to 18 years they started up again. So, that's a government regulation story.