Health Insurance Micro-Economics

Posted on November 9, 2009 by David Laidlaw 

My firm’s health insurance renewal notice came in the mail the other week.  Laidlaw Group has a high-deductible plan with a health savings account (HSA) through United Healthcare/Oxford.  Shockingly, our premiums are scheduled to rise 21% from last year’s level without any major claims over the history of our policy.  These increases are consistent with prior increases including last year when our premiums increased 13.5% and the prior year when they rose by 18.8%.  Over this three year period, our health insurance expenses have increased by over 63%.

These increases in premiums are completely divergent from price levels for other goods and services throughout the economy.  During the same 3-year period, the Consumer Price Index has increased by a very mild 5.8%.  While medical knowledge increases and novel treatments and pharmaceuticals have been developed over the preceding three years, these quantitative advances have occurred at the margin.  Anecdotally, service levels within our plan have decreased since wait times – both to schedule appointments and during visits – have increased substantially. 

As a business owner and healthcare consumer, it is very difficult to pay ever-increasing premiums without receiving any added value.  Regardless of the outcome of the debate in Washington, our company plan will change so that we are not paying 60% more for less reliable service three years from now.