With tax day just one week away, many Americans are being reminded that 2014 was the first year they will have to pay a penalty for not having health insurance. The requirement to get health coverage is leading more and more people to sign up for health insurance and helping to reduce the rate of the uninsured. At the same time, these new customers are helping to bolster profits at the largest brokerages and insurance companies. The cost of health coverage is also affecting the family finances of the newly insured, many of whom work in low-wage industries which frequently do not offer employer-sponsored health benefits.
As Crain’s reported in its Spring 2015 Benefits Outlook, the number of working-age adults without health insurance dropped in 2014 to its lowest level in a decade. When the Affordable Care Act (ACA) was signed into law in the first quarter of 2010, 16.1% of American adults lacked health insurance. By the end of 2014, the first year the individual mandate was in place, the uninsured rate had dropped to 12.9%.
This shift helped to drive a 3.9% increase in total medical enrollments among the five largest publicly traded health insurers in 2014, and a 10.2% increase in revenue over 2013, according to Business Insurance magazine. As just one example, the nation’s largest health insurer, UnitedHealth, recently saw its stock price reach an all-time high after growing three times faster than the S&P 500 in 2014.
Similarly, the five largest publicly traded insurance brokers saw their revenues increase in 2014, with organic growth rates of between 3.3% and 6%. This growth enabled these large brokers to consistently deliver double-digit operating margins. It is widely expected that large brokers will use some of these profits to acquire smaller competitors, consolidating the market even further.
More broadly, the rise in health insurance coverage comes at a time of polarization in the labor market, when 44% of Americans are living paycheck-to-paycheck. The greatest number of job openings are for low-wage occupations, while the occupations experiencing the most dramatic decline generally paid better than the new jobs that are replacing them. As the Milwaukee Journal Sentinel recently reported, most families in the greater Milwaukee area would need three typical full-time low wage jobs in order to pay for necessities. And of these necessities, the report found that healthcare expenses consume a larger portion of a local family’s budget than food and housing expenses combined.
All of this underscores the importance of obtaining an independent review of your organization’s health benefits strategy. Between traditional commercial options, public exchanges, and private exchanges, employers and individuals have choices to get the coverage they need. But with employers and families both feeling squeezed in today’s economy, it is more important than ever to be educated about all of these options so you can make an informed choice.