Since the beginning of 2012, health insurance costs have skyrocketed significantly above the rate of overall inflation. As you can see from the chart below, health insurance inflation peaked at almost 15% per year in 2012 and at 12% in 2007 while overall inflation hovered around 2%. When people focus in on one single item, this is why many people don’t believe the overall inflation rate. They say, “Oh, my health insurance went up 15% how can inflation be only 2%?”. But what they fail to take into consideration is that in September of 2008 when the overall inflation rate was 5% health insurance was falling 2%. Yes, according to the U.S. Bureau of Labor Statistics, health insurance costs actually decreased 2% from year earlier prices. And continued to fall at between 3% and 4% all of 2009, 201o and 2011 while prices in general briefly fell to a deflationary -2.0% in 2009 but then bumped along between 1% and 4% for the next couple of years.
At the beginning of 2012, health insurance costs shot up in an effort to make up for lost ground.
With that in mind let’s look at the actual prices of health insurance. From the following chart provided by The BLS we can see that prices actually did decline from December 2007 through mid-2011 before they began climbing. This chart sets the base price at 100 in December 2005 and we can see that when prices bottomed in mid-2011 they had fallen from around 115 back down to 105 so prices never actually fell below 2005 levels and currently they are more than 20% higher than they were in 2005.
Many people believe that the recent rise in insurance premiums is the result of insurance companies anticipating the effects of Obama-Care. A study by the Society of Actuaries estimating that insurance company claims will rise significantly. The Washington Post says this about the study:
The study says claims costs will go up largely because sicker people will join the insurance pool. That’s because the law forbids insurers from turning down those with pre-existing medical problems, effective Jan. 1.
Obviously, those with pre-existing conditions are going to cost insurance companies more than healthy people.
If you would like to see how the overall level of inflation has affected prices use our Inflation Calculator.
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