Is Health Insurance Premium Growth REALLY Slowing?

Jan 10, 2015

I frequently write about the importance of using words properly in order to make numbers understandable. This week’s example is an article in, about recent trends in health insurance premiums. The subject is critically important, and the publication is prestigious. And yet, the article has several statements that are unsupported by the facts. The problem isn’t that the author misunderstands the information, it’s that he’s mischaracterizing it. This is where proper use of words comes in.

The article starts by observing that “the growth in employer-provided health insurance premiums has slowed significantly since passage of the Affordable Care Act.” It goes on to suggest that this slower growth “apparently contradict[s] critics who had warned that the [ACA] would accelerate premium increases.

That sounds great. However, the article also observes that deductibles are increasing at the same time. (For all we know, the newer policies may also have higher copays and coinsurance rates, but the article is silent about that.) It’s trivially simple to reduce premiums by reducing benefits – imagine how much lower your premium would be if your deductible were $50,000! The right question to ask is, “How much have premiums increased for the same coverage?” It’s meaningless to compare the relative prices of two insurance plans with different benefits levels.

The real story – in fact, the only story, as near as I can tell – is that employers are shifting more of the healthcare cost burden over to their employees, through higher deductibles and increasing the portion of the premium to be paid by the employee. That’s a question of great importance to organizations, who need to offer employees competitive benefits packages.

(It’s also a policy question of great importance, since some experts contend that increasing the share the individual pays of his/her medical expenses is the best way to rein in the growth in total healthcare costs, which is the real elephant in the room. But that’s a separate discussion.)

It’s a shame that a publication published for CFOs – who are, after all, the “numbers guys” – would be so imprecise about a critically important numerical issue.

“Painting with Numbers” is my effort to get people to focus on making numbers understandable.  I welcome your feedback and your favorite examples.  Follow me on twitter at @RandallBolten.

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