Point of View

As consumers, we are aware that our health insurance premiums continue to rise, but we don’t always understand why.

Did you know?

According to the Health Care Financing Administration:
• 2002 was the 3rd year in a row of double digit increases in health care costs
• Health care spending equals 14% of the U.S. economy.
• Three times as much is spent on health care than on defense spending in the U.S.
• The amount of money spent on health care in America is greater than the money Americans spend on shelter, food and automobiles combined.

What is driving these facts?

Several factors are contributing to the sharp increase in health care spending. The U.S. has access to the best health care in the world, but the latest medical technological advances are expensive. Liability and medical malpractice suits have added $5 billion to the cost of our health care spending.

Because of the advances in medical technology and the new drugs available to treat diseases that were previously untreatable, the life expectancy in the U.S. has increased from 47 years of age in 1900 to 76.9 in 2000. Because we’re living longer, we’re receiving more medical care for a longer period of time.

The design of today’s health care plans has contributed to health care spending. Americans are accustomed to receiving high levels of benefits with very little out of pocket. Because they pay only small copayments for office visits and prescription drugs, individuals are isolated from the true cost of health care. The Centers for Medicare & Medicaid Services report that in 1960, Americans paid 49 cents out of every dollar spent for health care; today Americans pay only 14 cents out of every dollar spent for health care.

How can employers help control these costs?

Many employers are looking for ways to continue providing health insurance for their employees while cutting costs. Most plan designs now include discounts for care received from network providers. Because network providers accept lower negotiated rates, both the employee and the employer save money.

Additionally, employers are offering a variety of plans with a range of benefits and deductibles. This allows their employees, who are often being asked to share a greater portion of the cost of the plan, to choose a plan that better fits their budget. The latest trend in health care coverage includes consumer-directed health care plans like Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs). These plans help the consumer become more aware and more accountable for the health care dollars.

Donna Lively is the Department Head of Insurance Marketing for GuideStone Financial Resources.