Health Care: What Lies Ahead
In 1960, the average American spent about $147 a year on health care expenses. In 2017, that number was $10,739. In the ’60s, the health care industry represented 5% of GDP. In 2017, it was nearly 18%.1
Unfortunately, annual incomes have not increased on par with this particular cost of living. As a result, more of the money we earn goes to our health care expenses. In 2018, middle-income workers spent an average 6.8% of their earnings on premiums for employer-sponsored health insurance and another 4.7% on deductibles.2
If you’re concerned about increased health care expenses in retirement, we can help. Some insurance products, such as life insurance and annuities, provide various options you may want to consider. We’d be happy to discuss your options based on your unique situation.
America’s problems with health care spending aren’t expected to curb anytime soon. The second-largest generation — baby boomers — are aging and experiencing more medical conditions associated with a long life expectancy. But on their heels is an even larger generation — millennials — who aren’t as healthy as you might expect. Studies show this demographic is experiencing high rates of rates of depression, hyperactivity, hypertension, high cholesterol and tobacco use.3
Along with increased costs for an aging population, a recent study estimates the tab for testing and treating the coronavirus this year will be about $103 billion, although it could run as high as $251 billion. While insurers and employers are expected to absorb most of this cost, the report projects that, sans any legislative intervention, commercial health insurers are apt to increase 2021 plan premiums by anywhere from 4% to 40% in order to cover those medical claims and remain solvent.4
Americans relying on health insurance plans purchased through the Patient Protection and Affordable Care Act, also known as Obamacare, may have even greater uncertainties though. Last December, in a lawsuit filed by Republican state attorneys general, a federal appeals court ruled that the reform bill’s individual mandate is unconstitutional and returned the case back to the lower court to figure out if more of it should be overturned. If other revenue provisions are found to be unconstitutional, the Act could fall apart and millions of Americans would not be able to afford insurance. The case is presently on the docket for review by the Supreme Court.5
Content prepared by Kara Stefan Communications.
1 Kimberly Amadeo. The Balance. Feb. 28, 2020. “The Rising Cost of Health Care by Year and Its Causes.” https://www.thebalance.com/causes-of-rising-healthcare-costs-4064878. Accessed May 14, 2020.
2 Sara R. Collins, David C. Radley and Jesse C. Baumgartner. The Commonwealth Fund. Nov. 21, 2019. “Trends in Employer Health Care Coverage, 2008–2018: Higher Costs for Workers and Their Families.” https://www.commonwealthfund.org/publications/2019/nov/trends-employer-health-care-coverage-2008-2018. Accessed May 14, 2020.
3 Emma Court. Time. Nov. 6, 2019. “Millennials’ Chronic Health Problems Will Limit Their Lifetime Earnings, Report Says.” https://time.com/5720313/millennials-health-limit-earnings/. Accessed May 14, 2020.
4 Health Policy Institute of Ohio. April 3, 2020. “Insurance premiums to spike in 2021 because of COVID-19, report forecasts.” https://www.healthpolicynews.org/daily_review/2020/04/insurance-premiums-to-spike-in-2021-because-of-covid-19-report-forecasts.html. Accessed May 14, 2020.
5 Paula Burkes. The Oklahoman. April 17, 2020. “Supreme Court to review ACA for third time.” https://oklahoman.com/article/5660280/supreme-court-to-review-aca-for-third-time. Accessed May 14, 2020.
We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.
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