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Are your health insurance costs outgrowing your income?

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The New York Times [registration] reports that annual health insurance costs -- which averaged $12,106 per family -- grew faster than average incomes in 2006.

Conveniently, government inflation statistics do not capture the rapid growth in health care costs, nor the other big costs affecting a middle class household such as energy (oil hit a record $78 per barrel yesterday), food (wheat prices are at a record high of $9 a bushel), education (college tuition rose an average 5.8% between 2001 and 2006), and housing (despite recent declines, housing prices have boomed in this decade). But the Consumer Price Index (CPI) -- +2.4% in July compared to the previous year -- has been carefully crafted to put a lid on growth in Social Security and other government programs whose payments are tied to the CPI.

So in 2006, health insurance costs grew an average of 7.7% while the CPI rose roughly 3%. Meanwhile, median family income declined 2% adjusted for inflation between 2000 and 2006. And in 2008 health insurance costs are expected to rise between 6.7% and 11% depending on which analyst is doing the forecasting.

How do your health insurance costs compare to the average? Are you scrimping on vacations or other budget items to pay those health insurance costs? Is your health insurance coverage worth the money you pay?

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.

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Last updated: November 25, 2009: 10:40 PM

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