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Unsustainable Pot of Water

You have no doubt heard of the parable about the boiling frog. The premise is that if you place a frog in a pot of boiling water, it will jump out. However, if it is placed in cold water that is slowly heated, it will not perceive the danger until it is too late – it is cooked to death. This parable illustrates how people should make themselves aware of gradual change before they suffer the catastrophic consequences. So it goes with health insurance premiums (and our health care ‘system’).

This “boiling frog syndrome” can also be found right here in Iowa. Based on the results from our 2011 Iowa Employer Benefits Study©, we found that the average annual family premium paid jointly by both the employer and employee was $13,295! An astounding number!

As concerning as our premiums are in Iowa, they appear tame compared to what they potentially will become in the next ten years. Based on our annual studies, the average premium increase reported by Iowa employers during the last five years was 10.2 percent (prior to making plan design changes to bring their rate increases down). If we trend the Iowa family premium by 10.2 percent annually for the next ten years, the $13,295 premium now becomes (drum roll, please), about $35,000 (or 164 percent higher than today)! Again, we assume that the employer has not made changes to their health plans during the next ten years, which is HIGHLY unlikely.

Quite obviously, Iowa employees will see their take-home pay become severely suppressed. In 2011, the average Iowa household income was approximately $50K, which means the family premium was 27 percent of the income earned by the average Iowan. In 2021 (assuming that income increases an anemic 2 percent annually for the next ten years) the family premium would be almost 60 percent of household income! This truly defines the word, “unsustainable”.

Health reform in this country, however it looks, will need to aggressively address the cost issue – as it remains to be seen how successful the existing health reform law will do this.

Like the frog, we are slowly being cooked. We need to find a way to jump out of that simmering pan of water before it becomes too late.