The Scooby-Doo Ending
Unemployment is high and wages stagnant, but that hasn’t stopped health insurance companies from hiking premiums by 9 percent this year, a new survey shows.
The poll by the nonprofit Kaiser Family Foundation found that the average family insurance plan purchased through an employer now costs over $15,000 per year. That’s more than double the average price 10 years ago, the New York Times calculates. And Kaiser Family Foundation president Drew Altman points out it’s more than the cost of a new Chevy Aveo or Ford Fiesta…
…The causes of this year’s spike are debatable, but Obamacare is sure to take some of the blame. The Times says some analysts believe insurance companies are getting their price hikes in now before a provision kicks in next year requiring them to justify any double-digit increase. And some of the rise in costs is likely coming from requirements already in effect, such as mammogram screenings and other preventive services.
The White House moved quickly to offer its own explanation: Insurers raised their prices in anticipation of higher costs, but ended up pocketing some of the money in profits. “Wall Street analysts’ review of results from the first quarter of 2011 found that 13 of the top 14 health insurers exceeded their earnings expectations, with profits that were over 45 percent higher than estimated,” the administration noted in a blog post.
If that’s true, next year’s price hikes could be more moderate. But meanwhile, employers are feeling the squeeze, with many citing the high cost of coverage as a deterrent to hiring (emphasis CC – yes, mammograms are driving unemployment.). And increasingly, they’re passing the costs on to workers in the form of higher out-of-pocket costs, the Washington Post reports. Half of all workers at small firms now pay annual deductibles of $1,000 or more.
And from N.C. Aizenman writing about the same Kaiser Family Foundation poll at the Washington Post:
Employers seem to be turning to cost-shifting as an alternative to dropping coverage outright. During the first half of the decade, the share of companies offering health insurance shrank from 68 percent to 60 percent, and the figure for very small firms dropped from 58 percent to 48 percent. But since about 2005 that decline has leveled off.
Premiums paid directly by workers have galloped ahead of wage increases and inflation — rising 131 percent between 2001 and 2011 for family plans. Employer costs for those plans have gone up 113 percent over the same period, as some have asked their workers to take on a higher proportion of premium costs.
Still, employers are primarily coping with rising health-care expenses by moving their workers into plans with higher out-of-pocket costs such as deductibles, co-pays and co-insurance.
Ignoring the not-so-understated conservative hackery in the Slate article and the relatively-understated liberal hackery in the Washington Post article, I see this playing out in one of four broadly-construed ways. I’ll present these scenarios in the style of Wayne’s World endings (that link for Rufus et Jason):
The Perfect Hayek Ending (No government intervention is necessary because the free market fixes problems.): Without any structural reforms, the free market will sort out the problem. The reason employers are reducing coverage now while at the same time cutting payrolls is because it’s a buyers labor market. Cyclical or frictional or structural unemployment must persist until companies figure out ways to start growing again, at which point the labor market will become more of a seller’s labor market. With more decision-making power, employees will select positions that offer more-attractive health insurance benefits, and gradually we’ll start to see the sort of high-quality, employment-tethered plans we’ve grown accustomed to, all driven by the free market. Additionally, as a corollary – and this verges on the super-perfect Hayek ending – Americans suddenly recognize that rising health insurance costs represent a deteriorating national standard of health. Testudine facta – Americans reject fast food and other unhealthy eating habits, start exercising, stop over-medicating children, and embrace neurodiversity. We also continue to quit smoking and adopt less-stressful lifestyles in general. Due to markedly-increased levels of aggregate healthiness, the retirement age is raised to seventy-five to compensate for prior age-negligence; no one complains or misses a beat. Since there is only a four-day workweek now, everyone loves his job. Physician-assisted suicide is allowed, which also drives down health care costs, as we no longer fear death but live our lives for future generations, since the long-run and the future world for our children is all that matters. 🙂
The Marxist (but not Communist)/Big-Stick Ending (Structural problems persist and must be solved by changing structure.): These monstrously high health insurance costs that are keeping employers from hiring represent a structurally-ingrained, permanent check on hiring that exists in the present system. The inevitable consequences of this cannot be mitigated without strong, central action. The only way to restore natural or full employment is to forcibly separate the labor and health insurance markets, whether this is accomplished by creating a full-on, national single-payer system, instituting free-market reforms, or some combination of both. 😉
Murphy’s Ending (Empirically, pessimism prevails.): It’s too late: employment-tethered insurance has strongly disincentivized entrepreneurship, and we have few-or-no metaphorical seedlings growing for the next generation of Americans to harvest. Even if we can separate the labor and health insurance markets, regulatory capture and entrenched interests have already taken hold; we enter a deep, long-cycle of semi-feudal corporate imperialism. Plus, more problems we aren’t thinking of now. 🙁
Cheech and Chong Ending: Like, so what if health insurance costs are the limiting reactant on employment? Whatever. 😛
So, which ending do you think is most likely?