[andzt]

We have had similar discussions in our own company, which is much much smaller than AOL. It's definitely not directly caused by Obamacare, but we've watched healthcare costs significantly rise over the last few years. And it's mostly these "catastrophic" cases - major surgeries, expensive pregnancies etc. We are try to figure out how we can continue offering great benefits but we'll probably have to make a change. Not to save our billion dollar profits (I wish), but so we can continue to function as a company and employ some great people...

[jbooth]

Health insurance costs rose by 131% from 1999-2009[1], which comes out to just under 9% inflation. That's in comparison to an average 2.5% inflation for all goods including healthcare since 2000[2]. 2.5% inflation turns $100 into $128.01 over 10 years. Instead, we got 231.

About 10 years ago I was in local government, we laid off teachers every single year in order to keep paying health insurance premiums for the rest of them. More money for less bodies.

[1]http://business.time.com/2009/09/16/health-insurance-premium...

[2]http://inflationdata.com/Inflation/Inflation_Rate/Long_Term_...

(edit: fixed my numbers thanks to twoodfin)

[twoodfin]

Healthcare costs have averaged ~15% inflation since the 90s.

Not even close[1].

CAGR of U.S. health care expenditures 1990-2012: 6.05%

CAGR of U.S. health care expenditures 2000-2012: 5.59%

And that's total spending, not accounting for population growth.

Health care expenditures have grown faster than inflation, but not anywhere near 15% annually.

[1] http://www.cms.gov/Research-Statistics-Data-and-Systems/Stat...

[nitrogen]

Healthcare expenditure is not the same thing as price of insurance.

[twoodfin]

I don't understand what you're suggesting. If insurance costs were rising at ~15% annually while total expenditures were rising at ~6% annually, you'd expect to see insurance administration/profits become the #1 expenditure in short order. But per the CMS data I linked, those were only 6% in 2012 ("Net Cost of Health Insurance").

[jbooth]

Why's it have to come out as profits? Couldn't they just be a big lumbering bureaucracy that never gets cut because they never have pricing pressure?

Paying a bunch of idiots to run around and generate paperwork isn't profitable, but the money's still gone.

http://business.time.com/2009/09/16/health-insurance-premium...

Healthcare premiums up 131% in 10 years.. that comes out closer to 9% than 6%. And doesn't include co-pays or anything that insurance doesn't cover.

EDIT: For the record, this kind of industry BS is why liberals support single-payer healthcare. It's not that we're commies or even that we don't understand the inefficiency of government bureaucracy. It's that we'd prefer the dumb public bureaucracy to our current even dumber private bureaucracy. Something being 'private' without pricing pressure isn't capitalism.

[twoodfin]

Why's it have to come out as profits? Couldn't they just be a big lumbering bureaucracy that never gets cut because they never have pricing pressure?

Sure, but that would show up in the CMS numbers, and it doesn't.

Insurers are absolutely price-conscious, both of what they pay for and what they charge. It's not as if businesses will accept year after year double digit increases without shopping around. If there were big money to be made undercutting existing insurers, someone would go after that market, but there isn't: Health insurance profit margins are low single digits at best.

[dragonwriter]

> Why's it have to come out as profits? Couldn't they just be a big lumbering bureaucracy that never gets cut because they never have pricing pressure?

Not with the ACA limits on share of premium costs not going to care they couldn't. Before the ACA, they certainly could.

> For the record, this kind of industry BS is why liberals support single-payer healthcare. It's not that we're commies or even that we don't understand the inefficiency of government bureaucracy. It's that we'd prefer the dumb public bureaucracy to our current even dumber private bureaucracy.

> Something being 'private' without pricing pressure isn't capitalism.

Yes, it is capitalism. Its not free, efficient, competitive market, but its certainly capitalism.

[Cthulhu_]

That's mostly because there not being any restrictions on health care pricings (as far as I know); the insurance companies don't pressure hospitals to keep costs manageable, the government doesn't prevent health care institutions from charging widely different prices, and nobody stops pharmacy companies from charging exorbitant prices for medication.

[joelhaus]

This is called the "price elasticity of demand" in economics. Here is a good list of factors that affect elasticity of a good: https://en.wikipedia.org/wiki/Price_elasticity_of_demand#Det...

[panarky]

Taken to the extreme, you get Vallejo, California.

Great article by Michael Lewis on how healthcare and retirement costs grow to consume such a large share of a city's budget that very little is left for actual public services.

  Eighty percent of the city’s budget—and the lion’s share of the claims that had
  thrown it into bankruptcy—were wrapped up in the pay and benefits of public-safety
  workers... The public-safety workers thought that the city was out to screw
  them on their contracts; the citizenry thought that the public-safety
  workers were using fear as a tool to extort money from them... the police and
  fire departments have been cut in half; some number
  of the citizens ... say they no longer felt safe in their own homes. All
  other city services had been reduced effectively to zero. “Do you know
  that some cities actually pave their streets? That’s not here.”

http://www.vanityfair.com/business/features/2011/11/michael-...

(Starting on page 4)

[ronaldx]

You mention that healthcare costs have increased by ~15% per year. But using this percentage (assuming it is true) is misleading.

How does that cost-of-healthcare increase change the overall cost of employing someone? Clue: it's a lot less than 15%.

If you're laying off employees just for this reason, you're either doing something wrong or you're making political excuses.

[jbooth]

When I was serving my community, for 0 pay for the record, I was not looking for reasons to lay off teachers. We took the money we had coming in, looked at our cost increases for the following year (utterly dominated by healthcare), and laid of the number of people we had to in order to pay all our bills. No, it wasn't 15% of the workforce.

[sentenza]

This is why all the functioning welfare states have healthcare systems that are in large part state-run. I'd go as far as to say that privatization of health care and bundling health care with employment only ever make things worse.

Health care is an issue where you _cannot_ ignore the low-probability worst case scenarios but instead must always be ready to respond to them. So the bigger the group of people that are insured together, the better, which obvious leaves one scenario as best: Every citizen of a state pays into and recieves from one single health care pool.

Anyway, I wish you best of luck. I hope you find a way to make things work.