The Congressional Budget Office has released a new issue brief estimating how much obesity-related diseases contribute to health care costs and what policymakers will face in the future if they don’t address the epidemic. According to the CBO, “health care spending per adult grew substantially in all weight categories between 1987 and 2007, but the rate of growth was much more rapid among the obese. Spending per capita for obese adults exceeded spending for adults of normal weight by about 8 percent in 1987 and by about 38 percent in 2007″:

As one might expect, spending on the obesity-related conditions CBO identified is generally higher for heavier adults, but normal-weight adults also develop those conditions reflecting the fact that obesity is only one of the risk factors associated with those conditions. For example, spending in 2007 on obesity-related diseases averaged $2,030 for obese adults and $1,090 for normal-weight adults, a difference of $940. Therefore, spending on the obesity-related diseases CBO considered accounts for about 60 percent of the $1,530 difference in total spending on health care per capita between normal- weight and obese adults in that year.

Look:

The office estimates that if the obesity trend remained unchanged, costs would increase somewhere between $7,550 and $7,760 per adult in 2020 (from $4,550 in 2007). Should the distribution of body weight revert back to 1987 levels, however “projected spending per capita would be $7,230 per capita” — stil higher than today, but increasing slower.

I made the case against the notion that the health care law is forcing insurers to increase premiums here, but it’s also worth considering what insurers think the government should do about potentially unreasonable hikes. Here is AHIP’s Karen Ignagni, the industry’s top lobbyist, just six days ago on the National Journal’s Expert blog:

As final regulations are drafted in these areas it is critical that they be based on objective actuarial standards that take into account all of the factors that drive up health care costs. [...]

Rates that are actuarially justified should be deemed reasonable. This review should continue to be conducted at the state level because states have the experience, infrastructure, and local-market knowledge to review premium rates. If premiums are not allowed to keep up with rising medical costs, it would put at risk the coverage that patients rely on today.

Insurers would love to be held to no higher standard than “actuarially justified” in setting rates because all that phrase means is that an actuary has looked at the math and said it adds up. It doesn’t account for the fact that a lot of those costs go towards administrative expenses or marketing and it certainly doesn’t mean that this is the appropriate or best possible premium. Insurers on the individual market, for instance, can spend up to 40% of their premium dollars on non-health expenditures but under the “actuarially justified” standard this kind of spending would be acceptable.

Of course, insurers will have to spend more on care and less paperwork as reform is slowly implemented and in the meantime, I suspect many insurers are pulling out all the stops to take advantage of the system — while they still can.

Despite record profits, CEO pay increases, and ever decreasing medical loss ratio metrics, health insurers around the country are planning on increasing premiums in the small and individual health insurance markets — and they’re pinning the blame on five-month-old health care reform law. The Wall Street Journal’s Janet Adamy has the story:

Many carriers also are seeking additional rate increases that they say they need to cover rising medical costs. As a result, some consumers could face total premium increases of more than 20%. [...]

Weeks before the election, insurance companies began telling state regulators it is those very provisions that are forcing them to increase their rates.

Aetna, one of the nation’s largest health insurers, said the extra benefits forced it to seek rate increases for new individual plans of 5.4% to 7.4% in California and 5.5% to 6.8% in Nevada after Sept. 23. Similar steps are planned across the country, according to Aetna.

Regence BlueCross BlueShield of Oregon said the cost of providing additional benefits under the health law will account on average for 3.4 percentage points of a 17.1% premium rise for a small-employer health plan. It asked regulators last month to approve the increase.

In Wisconsin and North Carolina, Celtic Insurance Co. says half of the 18% increase it is seeking comes from complying with health-law mandates.

Look:

While there may be some justification in raising rates in response to rising health care inflation (estimated to be 3.2% in 2010), substantiating an increase that comes in the context of record profits and a long history of issuers fudging the numbers to extract maximum increases is difficult. Pinning the increases on the new regulations is just absurd, particularly since the actuaries have estimated that the new policies would only slightly raise premiums by 1 to 2 percentage points. Here is the Urban Institute’s Linda Blumberg:

Those policies that did not include lifetime or annual limits prior to reform should see no premium impact of these provisions. For plans with lifetime maximums of $2 million or higher, removing the limits entirely will tend to increase premiums by less than 1 percent (with the small group impact being smaller than non-group). And according to America’s Health Insurance Plans, the vast majority of individual market plans have limits of $5 million and above, making it highly unlikely that this change will cause a noticeable impact on non-group premiums. Because small group plans tend to be more comprehensive than non-group plans, a measurable impact in that sector of the market is even less likely. [...]

The prohibitions against pre-existing condition exclusion periods for children, including denials of coverage due to such conditions, should have little to no impact in the small group market, which already is required to guarantee issue policies. The federal agencies estimate the effect to be negligible in the group market. Again, the provision will decrease out-of-pocket costs for those who would have had care excluded from reimbursement without the reform. [...]

Estimates of the group premium effect of extending coverage for young adults on parents’ policies are provided in another of the Obama administration’s interim final rules. The effect of this provision can be expected to be small in the group market as well, with estimates ranging from .5 to 1.2 percent of premiums, depending upon the participation assumptions made. With regard to non-group coverage, similar issues arise as detailed for the pre-existing condition exclusion period for children. Carriers are expected to charge the specific families enrolling high-cost young adults in non-group plans significantly higher premiums than similar families with healthier adult children, then there will be little to no impact on the general population of insureds.

Any increases above that amount should at the very least trigger regulatory review. After all, it was just four months ago that independent analysts in California discovered that WellPoint “overstated future medical costs” to justify its 39% premium increases in the individual health market and committed numerous other methodological errors.

Insurers are right to argue that rising health care costs are the primary driver of health insurance costs, but in many markets, should do more than hide behind providers. Issuers must their own leverage to negotiate with hospitals and doctors for lower price, instead of simply passing along increasing costs to beneficiaries. But what’s happening now is an industry effort to maximize profits before the marketplace is substantially reformed in 2014. It’s a situation that screams out for a more robust rate review process — something the administration is trying to encourage through state grants.