Health Care Hostages
Let’s face it. Most of us are health care hostages. I don’t really like my job, Joe says, but I need the health insurance so I guess I will stay with it. Mary has done a great job saving for retirement, but fears about the cost of health care keep her from retiring. Jane would like to start a business, but can’t afford health insurance so she decides to wait.
I worked at a state university where the pay for some staff positions was very low, but the jobs were still desirable because of the benefits including health care. More than once, people told me that they took the job for the health insurance.
The Kaiser Foundation reports that 156,199,800 or 49% of Americans get their health insurance through employer-sponsored plans. How did we get to the point that employers are the main providers of health insurance plans?
The Wage Freeze of 1942
NPR’s Marketplace looked into the history of employer-sponsored plans and found that they were a result of a wage freeze imposed by the government in 1942. During WWII, employers were desperate for workers and kept raising wages. Roosevelt felt that this would undermine the war effort as workers moved from factory to factory to get a higher wage. Employers, realizing that no limits had been placed on benefits like health insurance and that the IRS had made health premiums tax free, turned to benefits as a way to recruit and retain workers. And so began the tradition of employer-sponsored health plans.
The Kaiser Family Foundation recently released data from its 2019 Employer Health Benefits Survey. The survey found that the average premium for a family plan averages $20,576 a year and that “on average workers pay $6,015 of the cost.” The survey also noted that over the past decade premiums and deductibles rose faster than wages. In fact, from 2009-2019 deductibles rose 162% compared to a 20% rise in wages.
The rising premiums paid for by employers have taken a bite out of raises for many workers. Employees have seen their share of the cost rise and high deductible plans have become common. Health care costs continue to grow faster than inflation and wages.
Read more about the problems caused by unaffordable healthcare in this article from the New York Times.
Not surprisingly, those in higher income brackets benefit the most from the tax-free status of health insurance premiums. Certainly, this is a reflection of the growing wealth inequality in our country – now at a 50 year high!
Retirees Fear Health Care Expenses
Health Care is often one of the biggest expenses in retirement. A recent report by Fidelity Investments indicates that a retired couple aged 65 will need $285,000 for health care expenses. This is more than the amount many older people have saved for retirement.
Rising health care and housing costs combined with wage stagnation have resulted in many people not having enough saved for retirement. Some have called it the retirement crisis. Since people are living longer they will need to have more in the bank for retirement.
Who is Profiting from Health Care?
Americans spend more on health care than any other developed country. And guess what? We don’t necessarily get better outcomes or care. Health Insurance companies and the Pharmaceutical industry are making big money from health care. People like the Sackler family of Purdue Pharma have been in the news as they face lawsuits related to the opioid epidemic. The Sacklers net worth is in the billions. The Sackler’s and Purdue profited by pushing the sales of opioids without regard for the consequences.
Why do drugs that have been on the market for many years suddenly jump in price? Greed.
CEO pay has been in the news as people begin to question the model of short term profits over long term growth and the lack of real wage growth for employees. Health insurance executives have followed the model of corporate America. According to the Star Tribune, the top five executives at health partners made 117 million dollars in compensation 2018. This is a company that is supposed to work for us managing health care costs.
Let’s take a look at 2018 annual income figures for Health Care Executives. (Data from Modernhealthcare.com)
- Michael Neidorff, CEO of Centene Corp. $26.1 Million
- David Cordani, CEO of Cigna $18.9 Million
- Gail Boudreaux, CEO of Anthem $14.2 Million
- Bruce Broussard, CEO of Humana $16.3 Million
- Joseph Zubretsky, CEO of Molina Healthcare $15.2 Million
- David Wichmann, CEO of United Health Group $18.1 Million
- Larry Merlo, CEO of CVS Health (bought Aetna) $21.9 Million
- Kenneth Burdick, CEO of WellCare Health Plans $12.7 Million
The eight largest publicly-traded insurance companies recorded a combined $21.9 billion in profits in 2018. (Modernhealthcare.com)
There are drawbacks to almost any plan to reform health care in the U.S. Those who profit the most from the current system use fear and misinformation to scare consumers away from meaningful reforms. It has been 77 years since employer-sponsored health plans began to be prevalent in the U.S. and over the years many people have become health care hostages. Solutions are out there, but as long as profits are the main motivation for insurers and pharma companies, we will continue to be hostages.