(It’s probably less than what you pay for gas.)
While heath insurance costs are rising, they still form a small percentage of overall household spending. Even ‘entertainment’ edges out health insurance by two percentage points, and clothes purchases match health insurance at 3 percent.
by Jeb Foster
|Insurance (all types)||
Please forgive the harsh, Phil Gramm-esque tone of the headline—we’re just trying to sell a few papers here (figuratively speaking, of course).
But there’s a kernel of truth to the idea that health insurance isn’t that expensive—at least when compared to other stuff. (In these troubled economic times, that’s probably a small consolation.)
But as a percentage of total household spending, insurance is surprisingly low on the list. In fact, the typical family allocates just 6 percent of its income to insurance, and that’s including all of the major types: car, home, health and life.
Health insurance in particular weighs in at a mere 3 percent, according to the U.S. Department of Labor. Compare that to transportation costs, which account for a whopping 16 percent of household expenditures, and health insurance starts to seem like a relative bargain.
The average monthly car payment is north of $400, which would be a great deal if it included gas, oil changes, tires and major repairs. It doesn’t, of course, and that’s why transportation costs eat up such a large percentage of a family’s budget.
Compare that car payment to the average premium: according to data collected by eHealthInsurance and published in USA Today, the average monthly premiums for private insurance ranged from $107 to $301 in 2007.
If you’re concerned about health insurance costs creeping ever higher, you’ve got a point. Let’s look at the consumer price index (CPI), an economic indicator that measures the cost of a fixed basket of goods.
The consumer price index for health insurance rose a steep 10 percent from 2006 to 2007, a larger jump than any other item in the CPI.
And recently laid off workers who are forced to buy individual health insurance may experience some sticker shock-rates have spiked in the past year.
According to an article from USA Today, published Feb. 20, 2009, Blue Cross of California raised premiums by 30 percent for most of their policyholders, and Blue Cross of Michigan is looking to increase premiums by — get ready for it — 56 percent.
The trend may continue if the economy doesn’t pick up; as health insurers lose more of their most lucrative clients-businesses buying group plans for their employees-they will likely look to make up the difference by raising rates for private coverage.