Your Soaring Insurance Premiums
New York Times
October 4, 2011
Annual premiums for employer-sponsored health coverage soared by 9 percent for families and 8 percent for individuals this year from 2010, far faster than wages or inflation. Republicans, predictably, blamed health care reform for contributing to the rise. In fact, the reforms accounted for only 1.5 percentage points of the increase this year. The value to millions of Americans who are already getting expanded coverage and benefits is undeniable.
So what is driving up insurance premiums? The main factors, analysts say, were increased medical care costs and higher profits for insurance companies, which charged a lot more in premiums than they paid out for medical services. Both problems are being addressed by the health care reforms. But, clearly, they will require even more vigorous attention.
This latest survey by the Kaiser Family Foundation and the Health Research and Educational Trust found that the average total family premium climbed above $15,000 in 2011, with the worker paying roughly $4,100 and the employer about $10,900. Since the survey started in 1999, worker contributions to premiums have increased 168 percent, while wages have gone up 50 percent.
The two reforms that affected premiums - together making up about one-sixth of the 9 percent premium increase for a family plan - required that parents be allowed to keep children up to age 26 on their policies and that many insurance plans cover preventive services like cancer screening and immunizations at no cost to patients. Some 2.3 million young adults were enrolled on parental policies and 28 million workers (plus their dependents) benefited from preventive care provisions.
The reform law has two provisions that kicked in this year and could help hold down premiums in 2012. Insurers will have to spend at least 80 percent to 85 percent of their premiums on medical care, which will force them to keep the premiums closer to their claim payments. And insurers seeking rate increases of 10 percent or more in the individual and small-group markets must disclose and justify their proposed rates, allowing state regulators an opportunity to reject them or force them down.
The reform law also provides $250 million for grants to help states strengthen their ability to challenge insurers’ rate requests. Only about half the states give insurance commissioners power to veto rates deemed excessive; all should allow regulators to reject unfair increases before they happen.
For the longer term, the reform law will create a slew of pilot projects in Medicare to find ways to reduce the cost of delivering care. Any effective strategy should be pushed quickly into the private sector. Until the underlying health care costs are reduced, it will be hard to hold premiums down.