Surge in U.S. Health-Insurance Prices Exposes Quirks in Data

The record surge in U.S. health-insurance costs seen in the Labor Department’s consumer price index Thursday highlights a key quirk in that line item: It’s not directly based on prices paid by consumers.

Instead, it’s an indirect measure based on retained earnings, or what insurers have after paying out claims. And unlike other prices in the CPI that are obtained each month, the department takes data collected annually and spreads the change equally over 12 months.

The latest CPI data showed health-insurance prices rose 1.9% in August from the prior month and 18.6% from a year earlier, both records in ...