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Another Voice: Increases in employee health insurance costs are unrelated to the ACA

By Larry Zielinski

I am often surprised at how many smart people conflate the rise in health care costs with the passage of the Affordable Care Act and how they believe the repeal of the law will help reverse this trend. Here are some facts that may shed some light on this (all data from the Kaiser Family Foundation).

These costs have been rising for decades. We saw double-digit per capita increases through the 1970s and ’80s, with 6 to 8 percent increases through the ’90s and the early 21st century.
After the 2008 recession, and the initial passing of the ACA, these increases were mitigated, averaging around 4 percent between 2009 and 2014, before ticking up a bit in the last two years.

But health care cost increases have been lower since the passage of the ACA than the prior 35 years. So why are so many intelligent people convinced otherwise? A look at what has happened to the employer market – where nearly half of the people in this country get their insurance – lends some insight.

Premiums on an average family health insurance policy in 1999 cost $5,791 per year, with the employer contributing $4,247, or 73 percent of the total. In 2016, premium costs were $18,142 – an increase of 213 percent over 1999. The employer contribution declined to 71 percent of the total, so the employee’s contribution went up even more – an increase of 242 percent over 1999.

Premiums have actually increased less in the employer market in recent years. From 2001 to 2006, premiums increased a cumulative total of 63 percent. Over the last five years, premiums have increased 20 percent. How did employers decrease this rate of increase?

Employers facing these crippling increases looked at a myriad of ways to limit their exposure. One of the most effective ways of decreasing premium increases was increasing the deductible portion of policies. High deductible health plans (HDHPs) now cover 29 percent of the employer-insured market. Between 2006 and 2010 – the first year of the ACA’s implementation – HDHPs tripled in frequency from 4 percent of the market to 13 percent. The trend has continued in recent years.

The combination of premium increases and especially higher deductibles amounted to a 63 percent increase in costs between 2011 and 2016. At the same time,  wages increased 11 percent.

Here is my conclusion: Health care costs have been rising well in excess of inflation for decades. Employers have been battling premium increases for nearly as long, normally transferring increasing portions of cost responsibility to employees. That trend hyper-inflated with the growth of HDHPs.

Since the passage of the ACA, health care costs have increased, but at the lowest per capita level in decades.

People covered in the employer market, on the other hand, have seen greatly increased total out-of-pocket costs.

The nation still faces the monumental challenge of controlling health care costs, but the increases that people in employer plans have experienced are largely unrelated to the ACA.

Larry Zielinski is executive in residence for health care administration in the School of Management at the University at Buffalo.

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