MARCH 8TH, 2022
It’s no secret that the American dollar doesn’t go nearly as far as it once did. If you had $100 in 1913, you’d need almost $400 in 1970 to “beat” inflation — and more than $1,700 at the turn of the 21st century. Jump forward to 2022, and that $100 in buying power would be equivalent to nearly $2,900.
No wonder so many Millennials struggle to afford a down payment on a house: Compared with their parents and grandparents at similar ages, Millennials are spending more on everyday expenses like gas and food — while also shouldering the burden of crippling student loan debt in addition to skyrocketing insurance premiums and out-of-pocket healthcare costs.
The high cost of healthcare in the U.S. has become particularly topical amid a global pandemic. About 50 years ago, national healthcare spending sat at $74.1 billion; by 2019, it had surged to nearly $4 trillion — yes, trillion — and that was before COVID-19 came onto the scene. In the first year of the pandemic alone, the U.S. healthcare spending growth rate more than doubled, and the Centers for Medicare and Medicaid Services expects spending to top $6 trillion by 2028.
On an individual level, a Clever analysis found that Americans spent $4,994 on healthcare in 2019, which represents a 101% increase from the $2,475 they spent on healthcare in 1984. You might assume soaring prescription drug costs and pricy medical services are behind this increase, but one of the main drivers of rising healthcare costs is high insurance costs.
It sounds a little counterintuitive. After all, health insurance is meant to help people afford necessary medical services. But the same Clever analysis found that insurance costs rose 740% between 1984 and 2019, while income only increased by 18%. Every year since 2000, insurance premium contributions have risen by 5%; as of 2018, the average American paid $3,400 for insurance annually.
Clever’s analysis examines the average cost of healthcare across all Americans, regardless of where they get their insurance coverage. About 50% of Americans participate in an employer-sponsored health plan — meaning they share at least some of the high cost of healthcare with their employers. In fact, a 2021 study from Willis Towers Watson predicted that American employers would increase the share of medical and pharmacy expenses they cover by 5.2% this year. Yet when we look at who pays for healthcare, employer-sponsored health plan participants are still on the hook for an average of $1,242 in out-of-pocket costs for single coverage.
The good news is that many employers are well aware of this issue. In the same Willis Towers Watson survey, 86% of employers said they were exploring different ways to increase the affordability of healthcare for their employees. Ultimately, the high cost of healthcare affects employers differently depending on their model of insurance.
For fully insured group health plans: Payors set insurance premiums prior to the start of the year. However, employees pay out of pocket for numerous medical costs below the plan deductible — and they’re often charged copays even after meeting their deductibles, which makes them vulnerable to inflation.
For self-insured group plans: Beyond what employees pay under the plan, employers must cover all costs for health claims. Reinsurance coverage usually protects employers against costs associated with unexpected emergencies.
Why is healthcare so expensive? It’s a question many of us have pondered, especially over the past two years. There are no easy answers, but employers can ease the burden of the high cost of healthcare by offering a benefit like Paytient.
When employees visit a local doctor, hospital, dentist, pharmacy, or even veterinarian, they simply swipe their Paytient card at the time of care. We fully finance qualified transactions, and the member then sets a payment plan that works for their budget. And because Paytient doesn’t charge interest or fees on these transactions, everyone benefits from a much healthier way to pay for care.
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