Wednesday, August 31, 2005

Health Costs continue to Spiral Upwards

There's a good article in USA Today about spiraling health costs today. We can identify with that. We just got hit with our annual premium increase - 18% higher than last year. We don't have company paid health insurance, so this is just another nail in our coffin. With this latest premium increase, premiums for my wife and I will hit 10K per year. That's just the premiums! That doesn't cover meeting the deductible and the 20% copays after meeting the deductible. I won't say what we make, but let's just say that is a whopping part of our salary. Even if we increase deductibles from $300 to $5000, we're still looking at $6400/year in premiums alone (having diseases like rheumatoid arthritis and diabetes does yourself no favors either when it comes to insurance companies deciding where you fall on their risk ladder). Is this crazy or what? These have been our premium increases in recent years:
  • 2001 - 10.8%

  • 2002 - 16.2%

  • 2003 - 22.3%

  • 2004 - 16.3%

  • 2005 - 19.4%

  • 2006 - 18.2%

Now last time I looked, we weren't getting salary increases each year along those lines. Last time I looked inflation wasn't at those levels either. Seems to me I'd better start buying stock in insurance companies.

And when you start looking at alternative plans, it becomes a bewildering maze of figures and becomes very complicated forecasting what the next year might bring. And if you switch to the cheaper plan, then you can get burned by less coverage and there is the real possibility they won't let you switch back to the old plan. A conundrum to say the least. I'm currently investigating HSA plans (Health Savings Accounts) but they aren't all peaches and cream either.
An HSA (in which money contributed is tax-deductible, grows tax-free and can be withdrawn tax-free for medical expenses) certainly can work for you. A worker who salts away $1,000 per year for 40 years in an HSA could accumulate $133,400 to pay for future health-care expenses, EBRI research shows. If the very same worker salts away $2,650 per year, the HSA nest egg could grow to a whopping $474,200.

But those sums, while tidy, are best case and assume a worker would not spend any money in an HSA on current health-care expenses. It assumes they would roll over 100% of their year-end account balances each year.

The more likely case is that a worker would spend some portion of the money in an HSA on current medical expenses. And once you factor the very real possibility that a worker rolls just a portion of their year-end account balances, the health-care nest egg starts to look meager, if not insignificant.

Consider, for instance, the worker who salts away $2,650 per year over 40 years but spends most of it for annual health costs and rolls over just 10% of the year-end account balance for 40 years. That worker would have only $10,000 in the HSA to pay for health care expenses in retirement. And that sum seems hardly enough to buy a box of cotton swabs four decades hence.

Doesn't sound so wonderful does it? Well there are suggestions to make it better and you can read about it in this article entitled Time to overhaul HSAs at Marketwatch.

Some will advise me to just find a doctor to declare myself totally disabled and then I can get on Medicaid. Well, that's fine, except I'm not disabled to that point, nor do I like the thought of not paying my own way and waiting on a government handout. I believe those should be reserved for the the truly needy, whose ranks we'll probably join pretty fast at this rate.

Looks like it's time to wing another letter off to the old congressmen/women in DC - fat lot of good that will do, but if you write a letter and your friend writes a letter, etc, etc - maybe somebody might just wake up. So help us out and sharpen that pencil.

2 comments:

California Health Insurance said...

It is unfortunate to hear so many lack health insurance. We really need to improve our health care system. Health insurance is a major aspect to many and we should help everyone get covered.

Blue Cross of California said...

Great blog I hope we can work to build a better health care system. Health insurance is a major aspect to many.