Republicans are already harping on yesterday’s Kaiser study — which found that premiums for employer-based coverage have increased by 9 percent — to claim that the Affordable Care Act is raising health care costs and undermining the Democrats’ promises of savings. Health care wonks were indeed surprised to see such dramatic premium increases (the highest since 2005) during a period of lower care utilization. Americans are skipping doctors visits to save money during a troubled economy and insurer are posting higher profits — so why are premiums still climbing?
The early benefits from reform — requiring insurers to offer prevention services without additional cost sharing and allow young adults to stay on their parents policies — are responsible for just 1 to 2 percentage points of the increase, much of the rest, insurers say, is simply overcompensation: companies charged higher than required premiums in anticipation that their costs would rebound once the economy recovered and Americans went back to utilizing more care. It’s a win-win business model for the companies, who keep the mark-up as profit if utilization fails to rebound, but a real burden on consumers who are having trouble affording the increase in premiums. Fortunately, the Affordable Care Act will begin to change that as insurers are required to spend 80 to 85 percent of premium dollars on providing health care benefits (the so-called medical-loss ratio provision) and states are empowered to review premium increases.
As the New York Times’ Reed Abelson and Nina Bernstein report, some states are already using federal grants made available by the health law to lower “unreasonable” increases:
New York, along with states including California, Connecticut and North Carolina, has been exercising its regulatory muscle to try to tamp down some of the increases. The Obama administration this month funneled a total of $109 million to many states, in part to help fight against “unreasonable” increases.
The increases now under consideration in New York would affect 1.3 million of the 3 million residents in individual and small-group plans; the amounts vary considerably depending on the type of policy. The increases requested by Aetna, for example, range from 8.9 percent to 53.6 percent, while those from United Health Group/Oxford range from 13 percent to 34 percent, according to the State Insurance Department.
In New York, consumer advocates contend that the latest requests exceed any documented rise in costs, with some companies enjoying three years of record profits and paying millions of dollars in dividends and executive compensation. “We’re at a watershed moment,” said Elisabeth Benjamin, who represents Health Care for All New York, a group of 100 organizations advocating affordable care. “The Cuomo administration has to decide, will the Department of Insurance stand up for the little guy, John Q. Public, or let the insurance companies get away with this nonsense?”
Some analysts are already predicting lower premiums for 2012, “saying costs are slowing down and increases in premiums would probably be more moderate.” Small business also “expect their premiums not to rise as sharply, only because younger, healthier employees are keeping claims low.” Yesterday’s Kaiser report found that “an estimated 2.3 million young adults under age 26 have been added to their parents’ health plans as a result a provision of the 2010 Affordable Care Act. That’s even more than the number estimated recently by the Census Bureau or the Centers for Disease Control and Prevention.”