PhillyDeals: Medical insurance prices 'unsustainable'

Medical-insurance prices for adults of working age will rise more than 10 percent again this year, says Aon Consulting, after collecting prices from Aetna Inc., Cigna Corp., and dozens of other private and Blue Cross health insurers.

How is that possible, when the Consumer Price Index is flat, and prices for food, clothing, and other basic goods have been falling?

"It's unsustainable," said Joseph Reilly, head of Aon's Northeast health and benefits advisory practice in Parsippany, N.J., which advises big employers on what benefits to buy, and what to cut.

Some of the causes are "demographic," Reilly said. American workers covered by health plans are, on average, a little older, a little fatter, a little sicker each year.

New technology is keeping sick people alive longer, but it is expensive. Doctors are ordering more tests. Generic drugs cost less, but drugmakers keep coming up with expensive new ones, paying for slick ads to get consumers to buy them, sticking insurance with the bills.

But managers aren't eating all those costs. "Employers might see a 5 percent increase," Reilly explained. "They're passing the other 5 percent on to the health-care population" - that's the public - through higher co-payments, higher drug payments, higher employee contributions.

What's going to stop health care from eating half your pay, or your payroll? Exercising more? Eating better?

"Long-term, the insurance market will definitely have some meaningful reform, whether or not it has a public option," Reilly told me.

We cannot afford to keep paying 10 percent more every year. Especially while the rest of the economy is still shrinking.

Oil also looks like it is defying laws of supply-and-demand. Economist Ed Yardeni asked readers of his daily newsletter yesterday, "Why is the price of oil at $73.90 a barrel," double last winter's levels?

Not because we're burning more. "Global demand for crude oil actually remains depressed," Yardeni said. The demand is just 84 million barrels a day over the past year, the lowest since 2005. (In the United States, Europe, and Japan, oil use is the lowest since 1996, though China, India, Latin America, and Arab nations are using more.)

Yardeni credits speculators. Oil "has become the go-to commodity to place a bet on a global economic recovery," he noted. "Oil is trading [in response to] global macroeconomic indicators rather than on its own supply-and-demand fundamentals."

Pennsylvania parents feel ripped off by the state's new fees and surcharges on the 529 Guaranteed Savings Plan tuition accounts, which I reported Sunday.

Bucks County resident Ken Jenkins said he had confirmed with state Treasurer Rob McCord's office that he would owe $1,663 in premiums and fees this year, up from $100 last year, thanks to new charges designed to keep the plan from running out of money.

That is what Jenkins gets for saving enough in advance to send his daughter to DeSales University, and almost enough to fill his three sons' future college accounts. "We really have no options, unless we want to take the tax penalty and withdraw the money," Jenkins told me.

"My cost for two accounts went from $50 to $803," wrote Alden R. Zove, president of Cedar Run Landscapes. That is enough to have paid for extra classes at Montgomery County Community College, where his son attends. "The only alternative I have to paying the fee is to close the account, which triggers a 10 percent penalty and state and federal taxes," Zove said. "I feel trapped."

Reader Bob Gabriel said his annual fee went "from $50 to $1,210." He is not pleased having to pay for the "ineptness" of former state officials who "guaranteed" the funds, and the private managers they hired to invest the money that ran short.

Gabriel is glad he was able to help his children pay for college. But, he added, "like all the other responsible folks in this downturn who have paid their bills, managed their mortgages, lived within their means, I feel like I am being punished for being an early contributor."