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.
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?