Healthcare is a topic Fred Wilson discussed over at USV recently. While Fred was writing in terms of this as an investment for their portfolio, it got me thinking about our “investment” in the coverage.
The cost of healthcare continues to skyrocket, especially for small business owners. This is not new news.
When I started Mullooly Asset Management back in 2002, I immediately acquired a new appreciation for the great healthcare benefits available – at my previous employer! Several different plan options were available to employees. These plans carried low deductibles and low out-of-pocket expenses.
This type of “Cadillac Healthcare plan” was completely out of reach for a small business owner. This plan was not available to me. Perhaps my insurance provider worried I’d have a stroke after seeing the cost, and thus submit a claim.
Since it was just me (and my family) the cost of a stripped-down coverage was roughly $600/month. Looking back now, seventeen years later, I’d love to have that coverage at that kind of cost. The cost for six employees now runs $42,000 in premiums alone, for 2019. This number does not include deductible costs.
The Milliman Medical Index
Over the years I often worried (inwardly and outwardly) if this healthcare coverage was good or bad. We never needed to find that out. We were all relatively healthy Americans. So, I considered the premiums to simply be an expense in those initial years of the firm. I have learned an important lesson. These expenses should be considered an investment in our team.
And quite an investment it has now become.
The Milliman Medical Index now shows the cost of healthcare for a family of four now runs at more than $28,000 per year (over $2300 per month). You can see their entire report here.
It’s pretty useless comparing healthcare costs (or the cost of anything) to what it was 15 years ago, 20 years ago, or when you and I were back in high school. That will only make us shake our heads and swear at the gods.
I found out in the past few years how excellent our coverage was and am grateful we have coverage when many do not. Mullooly Asset Management picks up 100% of the premiums as a business expense. But (as mentioned earlier) I consider this a good investment. That structure may not last forever. More businesses (both large and small) are throwing an increasing amount of healthcare costs on the backs of the employees. This is a disappointing development.