It was all over the news yesterday and this morning- health insurance premiums are going up at near-double-digits. Front page in the NYTimes, and a top story in hundreds of other media outlets.
Premiums were up nine percent, yet health care costs (for commercial insurers) had increased less than two percent in 2010.
What gives?
The bad news was triggered by another in the never-ending series of great research from the Kaiser Family Foundation on all things health care related. This latest report contains much in the way of valuable information, but we’re going to focus on the biggie – insurance premiums increased 9 percent this year, and now top $15,000.
Premiums increased 113% over ten years; if this rate persists, and there’s no reason to think it won’t, we’re looking at family premiums above thirty thousand dollars in less than a decade.
But just a couple days ago, Mark Farrah and Associates reported commercial health plans’ medical trend rates were at a historical low.
So, how can premiums go up nine percent while underlying costs only increased two percent? How does that work? Premiums go up more than four times as fast as the cost of goods sold?
According to the piece in the NYTimes,
“Aetna and United Health/Oxford said their requested rate increases in New York largely reflected actual hospital, physician and pharmacy costs. “Our rate requests are simply keeping pace,” said Maria Gordon Shydlo, a spokeswoman for United Health Group/Oxford.”
Yet MFA’s research indicates that those costs didn’t increase anywhere near nine percent in 2010. Health plans are saying that costs will increase faster this year for myriad reasons, and therefore they have to stay in front of those increases. That may be true, and it also may well be true that health plans are looking to sock away as much cash as possible for the investments they’re making to prepare for the post-reform world.
But that’s beside the point. Which is, could your business operate this way?
This is just disastrous. Healthcare premiums at this rate in this economy will continue to create major problems for the average American family.
Perhaps carriers are practicing for the regualtion that took effect 9/1/2011: “Effective September 1st, state and federal regulators will review double-digit rate increase proposals (+10% or more) from health insurers to determine whether the premium increase is reasonable. According to HHS, rate reviews will help bring down costs for small businesses and consumers.”