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After 15 Years, Not Much Has Really Changed (Except My Age)

I recently was cleaning out some very old files and came across a document that I wrote 15 years ago. Before tossing it, I decided to read it just one last time.

In 2003, I authored a ‘Commentary’ for the ‘Iowa Commerce’ magazine, an Iowa Association of Business and Industry publication that is no longer in existence. The article was simply titled, “Rising Health Insurance Rates in Iowa.” Little did I know that this title would continue to reflect on the state of our healthcare 15 years later.

In fact, the circumstances then should seem rather archaic compared to today’s challenges, right? See what you think:

Health insurance rates have been increasing dramatically for the last several years in this country. More specifically, employers in Iowa are experiencing higher increases in health insurance costs than employers have been receiving nationwide. With such increases, what are the economic tradeoffs confronting Iowa employers each year?

Our firm, David P. Lind & Associates (DPL&A), recently completed the fifth “Iowa Employer Benefits Study©.” For the last three years, we have noticed a disturbing trend that is plaguing businesses in Iowa – health insurance rates are increasing faster in Iowa than in the rest of the country. For example, our 2001 study showed that health costs increased 17.4 percent in Iowa compared to the Kaiser Foundation Study, which showed an average increase nationally of 11 percent. In 2002, the DPL&A study found that health insurance rates increased by 18.7 percent in Iowa versus 12.7 percent nationally (Kaiser). Finally, in 2003, health insurance rates in Iowa increased by another 18.2 percent. The Kaiser study for 2003 has not been released as of this writing, but other national studies are again proving that Iowa is experiencing higher than average rate increases for health insurance. In fact, over the last five years, our study shows an average increase in health insurance rates of 55 percent in Iowa! Such staggering increases have a profound economic effect on Iowa employers and their ability to make capital improvements.

There are a few key reasons why health insurance rates increase faster in Iowa than nationally. According to Iowa Cares About Medicare, an advocacy group, the state of Iowa has the largest percentage of its population over the age of 85 in this country. In addition, Iowa currently has the fifth highest percentage of people over age 65. People over the age of 65 are eligible for Medicare, the federal health insurance program for the elderly. A report from the Center for Studying Health System Change finds that per person spending on health care increases an average of $40 a year for each year a person ages from 18 to 50. At age 50, spending begins to accelerate rapidly, rising an average of $152 a year for each additional year in age between 50 and 64.

Also, Iowa ranks among the highest states nationally in the percentage of individuals who are overweight, according to a study funded by the U.S. Centers for Disease Control and Prevention. That same study found that people who weigh too much are at an increased risk of heart disease, diabetes, most types of cancer, and other illnesses. It also showed that an obese Medicare recipient costs $1,486 more annually than a Medicare patient at a healthy weight. Unfortunately, Iowa ranks 50th in the country for the rate of Medicare reimbursement that Iowa providers receive when giving care to the elderly. Consequently, Iowa medical providers (hospitals and physicians) must shift costs to the private-payer side to make up for the shortfalls received from the Medicare program.

According to the Iowa Insurance Division, Iowa employers with fully-insured medical plans (self-insured employers excluded), have paid approximately $2.46 billion for medical insurance in the year 2002. With rate increases averaging over 18 percent during the past two years, Iowa employers could possibly pay $2.9 billion in medical insurance premiums for 2003, approximately $443 million more than paid in 2002. Again, this does not include self-insured employers (State of Iowa and many large employers) and self-employed individuals who have private health insurance. In our 2003 study, Iowa employers were asked the hypothetical question: “If your medical insurance premiums remain stable (do not increase) over the next 12 months, how might your organization apply these ‘savings’ elsewhere with the organization?”

Overall, 10.4 percent of employers responded that they would make capital improvements and/or equipment purchases. Smaller employers (less than 250 employees) were more likely than larger employers to make this “investment.” Confronted by this huge economic trade-off of lost capital, it becomes more difficult for employers (both nationally and in Iowa) to reinvest this money to grow their business.

Clearly this trend must abate. We should not spend our time blaming various industries or organizations for this problem, but rather, offer constructive solutions that address healthcare affordability without sacrificing quality of care. A meaningful and ongoing dialogue must develop between all the major “players” within the delivery (and payment) of our healthcare system that would create a new vision and leadership agenda for the future. Why not begin this dialogue in Iowa?

Again, this was written in 2003. Thankfully, the average annual rate increase reported this year by Iowa employers (8.4 percent) is less than half of what was reported 15 years ago (18.2 percent). However, the discussion of affordability continues to plague us today. Since I wrote this piece, the combined rate increase reported by Iowa employers (2004 – 2018) exceeds 140 percent – with no real end in sight.

Except for my age, not much has really changed regarding the escalation of healthcare costs.

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