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Affordable Health Insurance, By Another Measure
 

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Last week, I wrote that the very important Kaiser Family Foundation report on health insurance costs (read it here) seemed to suggest that most small businesses want to offer health insurance, despite the very vocal efforts by some to shirk it. Now I want to take a quick look at the thorny question of whether health insurance is affordable.

The answer, according to nearly everyone, is, of course, no. For instance, we hear a lot about how health care costs are rising -- nay, "spiraling." Kaiser reports that premiums rose 6.1 percent in 2007, faster than either wages or overall inflation. In fact, since 1988, premium increases have outpaced earning and inflation for all but one or two years, often dramatically. Here's how Kaiser illustrated it, in a chart I borrowed from their report:

kaiser_premIncreasecht2.jpg

But it seems to me that the indicator that matters most when it comes to a firm's ability to absorb its employee's insurance isn't wages but corporate revenues and profits. Aggregate corporate revenues is a figure that's hard to find, but corporate profits isn't. Consider, now, this comparison:

premiums%20v%20corp%20profits.jpg

Changes in corporate profit swing maniacally, but as often as not, they greatly exceed the growth in premiums.

Which is not to say that health care costs aren't spiraling out of control. But perhaps occasionally we should look at it from a different perspective.

(The chart was designed by me, despite its apparent professionalism. The premium data was copied from Kaiser, and incorporates all of the caveats, while corporate profits come from the U.S. Bureau of Economic Analysis' National Income and Product Accounts Tables.)

Last updated: Sep 27, 2007




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