Any regular reader of this blog will be able to read the following article and burst out laughing, seriously.
While it’s possible even likely that some of these proposed premium increases are padded to allow for the fact that regulators will seek to trim them justified or not, the fact remains, like it or not, health care utilization is what drives premiums. You can look at the overall rate of health care inflation and say, what gives? How does 6% to 8% translate into double digit premium increases? There is a difference between the annual inflation rate and the trend rate used to set premiums. Total spending is not very relevant if you are setting premiums for a specific group, what matters is the spending by that group.
If you are setting premiums a year in advance, you want to know how much each service will cost, which services will be used and how many times they will be used. To make even an educated guess you need some idea of the health of the population you insure, but you don’t know a year in advance who will be enrolled the following year.
The point is that despite all the rhetoric, premiums must reflect the cost of providing health care and the administrative costs associated with doing so … and that’s the truth.. It’s also true that rarely will the premiums set for the following year be 100% accurate.. If they are too low, the next year will have to make up the loss thereby driving premiums even higher. If they are too high, the next years premium will also reflect that.
However, to simply say that the premium hike request is unjustified because you don’t like the results is irresponsible.
“Major insurers in some states are proposing hefty rate boosts for plans sold under the federal health law, setting the stage for an intense debate this summer over the law’s impact.
In New Mexico, market leader Health Care Service Corp. is asking for an average jump of 51.6% in premiums for 2016. The biggest insurer in Tennessee, BlueCross BlueShield of Tennessee, has requested an average 36.3% increase. In Maryland, market leader CareFirst BlueCross BlueShield wants to raise rates 30.4% across its products. Moda Health, the largest insurer on the Oregon health exchange, seeks an average boost of around 25%.
All of them cite high medical costs incurred by people newly enrolled under the Affordable Care Act.
Under that law, insurers file proposed rates to their local regulator and, in most cases, to the federal government. Some states have begun making the filings public, as they prepare to review the requests in coming weeks. The federal government is due to release its rate filings in early June.
Insurance regulators in many states can force carriers to scale back requests they can’t justify. The Obama administration can ask insurers seeking increases of 10% or more to explain themselves, but cannot force them to cut rates. Rates will become final by the fall.
“After state and consumer rate review, final rates often decrease significantly,” said Aaron Albright, a spokesman for the Centers for Medicare and Medicaid Services, the federal agency overseeing the health law.
Consumer groups are demanding federal and state officials put premiums requests under the microscope this year.
“We are really wanting to see very vigorous scrutiny,” said Cheryl Fish-Parcham, director of the private insurance program at Families USA, a group that advocates for the health law. Her group wants regulators and the public to debate insurers’ assumptions about rates and look for ways they could save money.
Insurers say their proposed rates reflect the revenue they need to pay claims, now that they have had time to analyze their experience with the law’s requirement that they offer the same rates to everyone—regardless of medical history.
Health-cost growth has slowed to historic lows in recent years, a fact consumer groups are expected to bring up during rate-review debates. Insurers say they face significant pent-up demand for health care from the newly enrolled, including for expensive drugs.”
via Health Insurers Seek Hefty Rate Boosts – WSJ.
QUINNSCOMMENTARY 
Who decided 10% per year was the right number? Talk about arbitrary!
So, if I had an individual policy that had a $1,000 deductible, 80%/20% coinsurance, $5,000 out of pocket expense maximum, and could choose between two insurers, tell me the PPACA rationale for the following:
In 2010, insurance company “A” was charging $500/month, and they have had successive increases of 9.99% in 2011, 2012, 2013, 2014, 2015 and propose another 9.99% in 2016 – now $881 per month.
In 2010, insurance company “B” was charging $400 per month, since then, they have had 10% increases each year, and for 2016, they are up to $709.
Why did we review insurance company “B” every year for their rate increase, but not insurance company “A”?
Stupidity.
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Stupidity … and politics to make Americans feel good and to perpetuate the myth that the Affordable Care Act made health care and insurance “affordable.”
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I have an idea. Since all healthcare rates are padded (doctors, hospital, insurers) how about we only pay the 25 to 66% of the premiums like the insurance companies pay out. If the doctors and hospitals are willing to accept pennies on the dollar then the insurance companies should accepted that too.
How many hospitals “lose money” on charity care but are still able to expand their buildings? Do they inflate the cost of services so that they can write off a higher loss figure? If a hospital only charged what they really would accept from an insurance company then could more people actually afford to pay their own bill. Currently you are penalized for paying cash at a hospital instead of going through an insurance company and that is just not right either.
I think once everybody stops padding the bills we will know exactly what healthcare costs and only then can we find ways of reducing costs.
Now if we can only reduce drug advertising on TV to reduce drug costs but that is another post.
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You forget that the premiums you pay already reflect the discounted rates paid by insurers to health care providers.
What we need is one set of negotiated rates paid by everyone; Medicaid, Medicare, private pay and health insurers. Then you would see the true cost of health care because the competition would be on the providers where it belongs, not with insurers.
Then you would also see the real, not subsidized cost, of Medicaid and Medicare.
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Here is a timely article from the Philadelphia Inquirer on hospital pricing. http://www.philly.com/philly/health/20150609_Are_inflated_hospital_bills_affecting_your_cost_of_care_.html
It does make me think about market forces: for profit hospitals vs non-profit hospitals. I suspect that if we allowed only for profit hospitals then large areas of this country would have no hospitals for hundreds of miles, or intercity hospitals doing expensive ICU and emergency room trauma would go out of business for lack of paying customers.
According to the article there is a provision of the Affordable Care Act that limits nonprofit hospitals’ billing practices, but says nothing about for-profits. Why? Doesn’t Medicaid have a very large interest in these billing rates as they figure out what they are willing to reimburse for a true cost of a procedure?
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