Summary of the last post (The Coming Healthcare Finance Crisis)

(I just summarized the last post for a friend, might be useful)

Businesses will experience possibly 50% to 100% increases in health insurance rates over the next 6 to 18 months, depending on their contracts and location.

Businesses with health insurance currently pay between 14% and 40% more than payroll for health insurance, depending on income per employee and location.

Their options with a 25% increase in rates:

• Cut employees. 1 employee per company means about 7 million new unemployed, taking the US unemployment rate to 10.7%. If the average pay is $40,000, you have 10 employees, and current healthcare costs are 25% of payroll, and rates increase 25% because of insruance company investment losses, you just loss $25,000, which has to come from somewhere
• Pay the huge increases, reducing profitability (profit would have to be significant to absorb this kind of increase), unless you...
• Increase prices, which is difficult in a recession, but if possible it's inflationary
• Reduce benefits, exposing employees to greater risk and cost, further taking disposable income out of the consumer-driven economy and putting employes at great risk of personal financial ruin
• Shut down.

Here's why:

• Markets are down 40% since May.
• Health insurance companies pool premiums and invest a significant portion across a diverse number of investment vehicles
• All of those investment vehicles have taken a serious hit.
• Insurance rates have historically risen dramatically when markets fall--it's and inverse relationship.
• There is nothing regulating health insurance rate increases, and I would suspect there's a bit of collusion; when we shop for rates they are typically similar each year.