This past week the W2 from my wife’s employer came in. In box 12c was a very large number, albeit an “informational” one only. It represents the amount paid for health insurance during 2016. Including both the employee and employer portions, our health insurance premium was over $21,000 last year! That comes to over $1,750 per month, which is more than most households pay for their rent or mortgage payment. And that comes with a $4,000 per person deductible, and $6,500 out-of-pocket maximum.
(Please see the updated 20 Part-time Jobs With Health Insurance post for the most current list of employers who offer health coverage for their part-time staff.)
Most people concern themselves only with the amount of health insurance that they have to pay, and pay little attention to what the employer pays. That’s similar to how most employees only see the 7.65% of their pay that goes for FICA taxes, with virtually no concern for the fact that their employer pays a matching amount. They act as if the employer paid portions don’t exist, and don’t even matter.
But they’re completely wrong in that assumption.
These “hidden” charges and taxes do affect your life in profound ways. Employer benefit payments, backdoor taxes and worker’s comp can double the cost of an employee to an employer. The employer doesn’t just “eat” those shadow expenses either. They’re a large part of why you can’t get a decent raise or promotion, and why your employer needs you to do the work of two or three people in order to keep your job. They’re also a major reason why the price of everything seems to be higher than it needs to be.
But let’s get back to the $21,000 we paid for our health insurance premium last year.
The Premium Will Only Go Higher in 2017 and 2018
As if $21,000 isn’t already outrageous enough, we will pay more in 2017. My wife was even informed of as much back in November. And worse, it will go still higher in 2018, and, we can presume, every year thereafter.
NPR.org reported last September that health insurance premiums are expected to increase by 22% in 2017. They also report that tax subsidies to low and moderate income households will also increase, as though that softens the blow. But if you are above the moderate income level, or you have a plan through your employer, the higher subsidy doesn’t apply to you. Only the increase in the actual premium matters.
So if we can expect a 22% increase, or thereabouts, in our health insurance premium for 2017, that means that we will pay something in excess of $25,000 for this year.
A further increase of 20% in 2018 would push our premium to well over $30,000 for the year.
Question: How high do health-insurance premiums have to go in order to maintain the integrity of the healthcare industry in the US?
Hint: This is Why Obamacare Isn’t Working and Can’t Work
At this stage of the game, it’s clear that there is no limit on how high health insurance premiums can go. This is the fatal flaw of Obamacare, and in fact the healthcare system in general. Virtually every effort made to fix the health care problem in the US has been aimed squarely at increasing funding ? through higher insurance premiums and steadily increasing co-payments, and deductibles ? while little to no effort has been made in the cause of cost containment.
The healthcare system has become like a giant vampire, sucking the blood out of the rest of the economy, as though the health of the economy that sustains it is a guaranteed source of support. But nothing could be farther from the truth.
In case you might be thinking that our $21,000 premium might be excessive, consider that the National Conference of State Legislatures (NCSL) reported in November that health insurance premiums were $18,142 in 2016 for an average family. Perhaps ours is a little bit higher than the national average because we live in New Hampshire, and healthcare costs in general are above average. Whether we’re talking about $21,000 or $18,000, that’s a lot of money for an average household to pay in a typical year.
Where will this all lead? I think it’s pretty obvious.
Trump said Obamacare Would Blow Up in Two Years – He’s Right
I realize that many millions of people absolutely despise Donald Trump. But there’s something that he’s been saying about Obamacare that’s absolutely obvious to anyone who?spaying attention: Obamacare will blow up in two years.
In case you think that that’s wrong, or is just more Trump hyperbole, consider once again the numbers that I presented above, of a health insurance premium of $21,000 in 2016, rising to $25,000 in 2017, and $30,000 in 2018.
My guess is that the funding mechanism is going to break down sometime between now and then. Perhaps it will be that employers will stop subsidizing health insurance premiums. Perhaps it will be the employees will look to opt out, because their portion of the contribution has become unbearable. Perhaps everyone who is not covered by an employer plan, and faces the full wrath of insurance premiums, will decide to go without coverage.
Once the first dominoes begin to fall, the collapse should be swift. Perhaps we’ll even see doctors and other healthcare providers pulling out of the insurance regime, and accepting cash payments at a greatly reduced rate.
It’s impossible to know exactly how it will play out, but is also important to know that it is more than a possibility. No nation on earth, not even the mighty USA, has unlimited resources to pay for healthcare. But that’s exactly where we’re going, and where many people believe we can go. Reality check: no we can’t.
The Centers for Disease Control (CDC) reported that healthcare costs were $3 trillion and consume 17.5% of the nation’s gross domestic product (GDP). That was in 2014 – more recently it has moved above 18%. That’s 18% of the entire US economy going into healthcare.
That’s a major point too. The percentage has been increasing steadily for the past several decades. If healthcare is already a heavy burden on the economy at 18% of GDP, how much worse will be at 20%, 25%, or 30%?
I’m afraid we’re going to find out, and not all the way out in 2050-something, or 2030-something. At the rate this thing is increasing, I believe this happen well before 2020.
How Far can Heathcare Go before it Bankrupts the Country?
I’m quite convinced that most people believe that the US government is an unlimited wellspring of money. That’s actually not an unfounded belief. The government’s penchant for borrowing, printing, or backdoor-taxing at every turn has it seemingly coming up with the money for every imaginable program that exists in the human mindset.
Healthcare is already well into the trillions of dollars, and the industry is insatiable. No amount of money flowing in in the form of premium dollars or consumer direct payments ever seems to be enough. How long will it be before we are running trillion dollar deficits, or double-digit inflation so that we can cover the cost of healthcare ? on top of all the other bottomless-pit programs the government has taken on and guaranteed into eternity?
I think there is also a building social/political cost waiting in the wings as well. Since the November election, we’ve been seeing a series of relatively peaceful demonstrations across the country, challenging the Trump Administration’s existence.
If you are in the anti-Trump crowd, you probably see this as a positive development. But be warned: when masses of people assembling for or against this or that program or politician becomes commonplace, it’s just a question of time before they also become violent.
I believe that the real reason for the large public marches is not so much about Trump himself. I believe it has more to do with the fact that many millions of people are fully aware that there are a series of disconnects in our economy and society. That is, there is visible deterioration in the living standards of the average person. It no longer takes much to organize large numbers of people to protest for or against anything.
Should health-insurance premiums rise another 20%, 30%, or 50% over the next two or three years, the demonstrations may very well take an ugly turn. After all, if people are struggling to pay for health insurance and health care at current exaggerated rates, what it will be like when those costs go even higher?
Meanwhile, the politicians and health industry leaders continue to pretend that they have time to work this out. Will they? The history of this issue doesn’t suggest anything of the sort. It seems almost certain that we’re going to experience some sort of healthcare crash-and-burn in the very near future. It’ll just be a question of how it plays out.
Worst Part of All: There’s Nothing Any of Us Can Do About It!
Most blogs and websites follow the pattern of pointing out the problem, and then setting a strategy, or a series of suggestions, on how to solve it. I’m sorry to report that when it comes to healthcare and health insurance, there is no solution. At least not on an individual level.
Obamacare has virtually removed options from the equation. Either you are covered by an employer plan, you get your own coverage on the exchanges, or you go without health insurance. And if you do go without it, you are subject to an IRS penalty. Which is really a penalty imposed against people who can’t afford health insurance, under the general assumption that they simply don’t want to get it (talk about fanning the flames of discontent!).
Since healthcare is a national concern, and now legally required and controlled at the national level, the citizenry has been effectively disempowered. There are no real strategies to deal with this.
I was recently checking the health insurance exchange here in New Hampshire, and found that we are now down to just three potential carriers. But it’s really just two, since one doesn’t cover most of the most common healthcare providers in the area. I’m hearing and reading stories of that same situation playing out in virtually every other state.
That means that even within the system that we’ve been given to work with, the options are extremely limited, and even declining.
We now have two basic choices in regard to health insurance: either get on a partially subsidized employer group plan somewhere, or go without health insurance and pay an annual IRS penalty.
There’s nothing any of us can do to change this, at least not on an individual level. But we should start putting pressure on the politicians who have created this mess, and start voting for those who support real reform, rather than just tweaks and bolt-tightening. The days are truly growing short with healthcare, to when all the choices we might make will be painful ones.
In fact, the rational observer has to admit that we?re already there.
What are your thoughts on the healthcare crisis? Can we continue to limp along as we?ve been doing? And what do you think it will take to fix it?
What a horrendous figure. You must have been in shock. Isn’t it interesting that before the election everyone hated Obamacare (I refuse to call it the Affordable Care Act) but now the polls claim everyone loves it. Must be the same polls that predicted Clinton would win in a landslide. We are so fortunate to keep our insurance after retiring. But it too goes up every year and the deductible and co-pays increase as well. So far nothing like you’ve had to endure.
Hi Kathy – Your comment has made me think I need to clarify something important. $21,000 (actually $21,055) was the total cost of the plan. The employer paid just over $12,000 of it, and we (or my wife more specifically) paid close to $9,000 in a 60/40 split. But that’s also a central point. We tend to look only at what we pay for insurance, but we can’t – and shouldn’t – ignore the real cost. If your employer is paying part of your health insurance, you’re paying it indirectly, through a reduced salary. I also think that the employer cost is limiting job opportunities, which hurts us all when looking for a job, or a job at higher pay. So, one way or another, we’re paying even for the costs we don’t see. That’s why the overall cost of healthcare is a lot more important than just the amount that we pay out of pocket. Nothing is ever free – one way or anther, we all pay.
You’re right about bearing in mind what the employer pays as well because what you described is absolutely true. As a small business owner, we decided not to hire any more employees after our two left for different reasons. We’re a small business, very small, but we still paid 100%, yes 100%, of the premiums for our employees healthcare up until two years ago. And they took it for granted, never giving an ounce of thought of what it costs us as employers, theirs plus our own, to give them this benefit. They got the same excellent benefits through BC/BS as we had for ourselves. And for larger companies, the same is true…that’s why employees aren’t seeing raises, bonuses, etc. Everything you stated here is correct. A meltdown is coming, at least in healthcare, and while I don’t like Trump, I know that there is a lot of truth in what he’s trying to tell the American people. He’s just so abrasive, but I think if we get past that, we can see that he has valid points.
Hi Bev – Thanks for weighing in with the view of health insurance premiums from the employer side. That’s a perspective that doesn’t get enough coverage, leaving people to think that it’s somehow painless, or that the employer should simply eat the cost in the name of the greater good. I think people need to be aware of employer paid expenses, that way they’ll have a better idea as to what’s REALLY going on out there, rather than listening to the talking heads, and concerning themselves only with their own direct costs.
As a nation, we’ve insisted on certain benefits and regulations, while giving little thought to the fact that they have real costs. Not just to “someone else” but to us as well, but often in ways that aren’t obvious.
We had a glaring example of this a couple of weeks ago. While visiting a family member who recently became a quadraplegic, we witnessed an exchange between the family member and his caseworker. The caseworker mentioned a treatment therapy and the family member referred to it as “free”. She quickly corrected him and said “none of this is free; if you’re getting a benefit, somebody somewhere is paying for it even if it isn’t you.” I was so glad she set him straight, but that’s what a lot of people think. As long as someone else is paying for something, we assume it’s free, then assume it to be some sort of indelible birthright.
I’m sorry you lost your employees, but I have a feeling you’ll do just fine without them. The new order in small business today is to sub-contract out jobs and tasks, and I hope you’re taking advantage of that. It’s a way to get the work done (at least sometimes) while not having to deal with payroll, benefits, worker’s comp and the threat of lawsuits. As well, you don’t have to pay employees during times when your own cash flow is lean.
I must be one of a minority because I realized the full cost of a healthcare plan years ago. I got a preview of actual cost helping my daughter find a plan for the small law office she worked at (pre-Obama days) when costs were substantially lower than they are now. ($5000 dollars year total between out of pocket and premium for a top of line plan). I had an employer paid plan where the health coverage was paid by employers but somewhere after 2000 the plans became more expensive and to keep both job and health coverage, I gave up raises because of cost. Being that most of us can predict our yearly take home income because of extremely low if any increase in pay, I have been questioning why these costs are become so high. I am now on Medicare with an extra cost for drug coverage. I pay for Medicare, it is not a free service. What I like about it now that I have had it since last year is that I can see exactly what services cost including drug cost. What we all need is transparency in costs billed for services. There should be a listed cost of services and one should not pay a higher prices based on geography. You mentioned New Hampshire costs, try comparing those to New York prices. Part of the problem of the increased cost is that the insurance companies put emphasis on bottom line profit showings. Healthcare si universal and not a profit making item as an end goal. There is a big difference between efficiency and profit. Where the insurance companies need to concentrate on is the fraudulent claims which make 95% of cost from5% of users who use the majority of coverage. I am not saying that these people don’t need coverage but whoever is billing for the services is abusing the loopholes making it harder and costly for those of us who use health coverage properly. You don’t need to use the emergency room to get a flu shot or get a cut checked out, etc. I would like to see more clinics for walk in services, plus access to same doctor for appointments so records can be maintained over the years. Despite being a digital age, I found out that there is no records on file for my medical history in terms of X-rays, etc. The only record on file for me is because I had exposure when young to my uncle who had contracted Tuberculous while serving on a Merchant Marine. That was over 50 years old pre-digital age. I know most doctors had to put everything into computers for at least the last 2 decades if not more, so where did theses records go, that they can’t be found. I am all for controlling costs by being more aware of treatments and cost. I was worried about Medicare and Social Security being effected with the upcoming changes to “Obamacare” but then I realized part of the problem is that the cost of the healthcare is being carried by those who use the least of the services and those who get it “free” or with subsidies aren’t even aware or caring for the real cost.
Hi Maria – You’ve hit on a couple of important points. The first is the lack of transparency in healthcare. That’s huge. There’s no way to keep a lid on costs if we can’t even clearly identify what we’re paying for and now much. But that’s become an industry standard, and it helps to hide the real cost, and make it easy to raise prices.
Second is the variable pricing. You mention costs between New Hampshire and New York, but charts show that the cost of healthcare varies widely from one state to another. How is it, since the care and training are standardized. But it does seem as if people in some states are more tolerant of higher prices than others, and who knows why?
As to the loss of your records, that doesn’t seem to surprise me. I’m often amazed at how often we have to reproduce documents in this computer/internet age. This stuff should be readily available, but mysteriously it isn’t. And it isn’t just in regard to healthcare either.
There are so many problems with healthcare, and that’s why I think this will ultimately blow up. We have uncontrolled growth in costs and no national will or consensus to reel it in. That means it can only end one way, and that won’t be pretty. We don’t even know what we’re paying for, and the system seems bent on keeping it that way.
Kevin, the crisis that is Health Care Insurance in the USA is the primary reason we’re working an extra year after “the numbers” say we should be able to retire. We’re assuming $1700/month for private health care insurance from Age 55 – 65, and I don’t think that’s going to be high enough. Plan for the worst, and hope for the best.
This is ugly, and won’t get better any time soon. Plan for it, and build the $$ into your retirement budget before you decide to pull the trigger on retirement!
I completely agree Fritz. Health insurance is one of those ugly topics that the early retirement fraternity tend to gloss over when they’re telling everyone how to get out of the rat race at 50, 45, 40 or even 35. They never cover the obvious elephant in the room. I suppose that’s because if they did, the whole thing falls apart. Even if you have enough to retire a few years early, will you also need an extra $20-25,000 just to cover health insurance. We should suspect that going forward, early retirement will be at 65, and late retirement will be 70 or later.
What makes it tougher still is that 55 – 65 are the “heart attack years” – that delicate time in middle age when you begin to learn why you probably aren’t going to live to be 100! I don’t mean to make light of that issue, but it is part of the aging process, and needs to be fully anticipated. You won’t have the option to go without insurance they way you might when you’re in your 20s or 30s.
Having discussed our healthcare cost crisis with my personal doctor, he stated that 75% of the cost associated with the patients in his general medical practice are attributed to poor diet, lack of exercise, alcohol consumption and smoking. If health care costs were aligned to an individuals willingness to take responsibility for their own personal health, cost would decrease substantially. While personal agency associated with health care cost should be the focus, it is largely being avoided in the national discussion. The question is why.
Hi Jeff – I think it has to do with numbers. 68.8% of US adults are considered overweight or obese, 35.7% are considered obese (source). More then 20% are smokers. And nobody wants to criticize or penalize drinking. We also have a drug epidemic. All of these lifestyle factors are so prevalent as to be considered normal. In fact, they may be more social than personal, as more people use them as coping devices to cope with an increasingly insecure life.
I’ve said it (or written it) before, and I will again, the only solution to the healthcare/insurance crisis will be rationing. Nobody wants it, so nobody’s talking about it, least of which the politicians. I don’t know exactly how it will come about – involuntarily we should suspect – but it will force us to make choices. This isn’t where I want this to go, but it’s increasingly looking like the outcome, especially since we’ve blown the chance to engineer a managed descent by pretending for years that we can have all the candy in the store.
I’ve heard it said, that “things will go as they have been – until they can’t anymore”. We’re probably a lot closer to that endpoint than any of us want to admit.