Healthcare, Shifting the Responsibility

With economic pressures increasing stress to the US family household, people are reverting to saving more and spending less to better plan for the proverbial “rainy day”. Most Americans will admit the increased costs of fuel, food and other basic needs have forced the reduction of discretionary spending. Gone are the days of buying on a whim or unplanned last minute vacations. The US consumer has adapted to the new economic landscape and is adjusting to a new lifestyle.

Over the last several years, much has been discussed and written regarding the rising costs of US healthcare. Employers, primarily shouldering the costs of increasing premiums, along with the US government are most concerned about the aging baby boomers. With the US and global economies cooling down, attention regarding healthcare turned to the competitive impact healthcare has on US companies.

A trend shifting the responsibility of healthcare costs to employees was analyzed by Milliman and the report was published in May 2009. The Milliman Medical Index showed a steady rise in employee healthcare contributions from 2004 to 2009. In fact, the cost of healthcare increased 37% from 2004 to 2009. According to the MMI, a family of 4 paid ,771 on average for medical costs. Employers covered 59% of these costs through healthcare benefits and employees paid 41% of the costs through payroll deductions and out of pocket expenses. However the trend of shifting costs to the employee was made obvious by MMI reporting employer contributions to healthcare increased 5.4% from 2008 to 2009 while employee contributions increased 20.1% (Milliman, 09). While averages display the growing trend, variability was found to be quite significant. Another MMI report showed that men aged 60 to 64 had healthcare expenditures five to six times greater than men between the ages 25-29 (Milliman, Milliman Medical Index, 2008).

The US population is beginning to view healthcare as an additional expense which must be budgeted and planned. With many financial plans focused on meeting investor needs, healthcare remains a topic not often discussed by an investor and financial advisor. Often a difficult subject to broach, advisors do not discuss their client’s health history. The time is approaching where investors and advisors need to work together to plan for the increased responsibility of healthcare coverage. In fact, a recent iMDAdvisor survey found 93% of respondents would change their investment strategy if they were shown their medical history could negatively impact their savings.

Working together, advisors and investors can plan for future healthcare costs thereby softening the impact of healthcare expenses. As the US government works to reform healthcare, we too will need to reform our views regarding healthcare and proactively seek solutions that will help pay for the expense.

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