US health insurers hiking premiums
9 January 2013
Health insurance companies across the US are raising rates for many customers, in some cases seeking and receiving double-digit increases in premiums from state regulators. The rate increases are one more confirmation that the Obama health care overhaul, many components of which have gone into effect with the new year, are geared toward increasing profits for private insurers while health care for the vast majority of Americans deteriorates.
In particular, falling victim to the hiked premiums are small businesses, as well as individuals and families who do not have employer-provided coverage. Young adults between the ages of 21 and 29 stand to be especially hard hit by cost increases when the health care reform legislation goes into full effect in 2014.
Under the Obama-backed Affordable Care Act (ACA), regulators must review any requests by insurers for premium increases of 10 percent or more. The New York Times has analyzed the requests for increases and regulators evaluations that are posted on the federal web site healthcare.gov.
Despite the rule in the federal health care law that requires review of any requests for more than a 10 percent increase, there are vast disparities in how the review process operates at the state level. While 37 of the 50 US states have legislation in place giving regulators some authority to deny or curb rate increases, in the remaining states regulators have little authority to rein in the demands of the private insurers.
In California, regulators cannot deny rate increases, but can only review insurers’ increase requests for technical errors. According to insurers’ filings in the state for 2013, Aetna is proposing to raise premium costs in the individual market by as much as 22 percent. Anthem Blue cross is requesting a 26 percent hike, while Blue Shield of California is asking for a 20 percent increase for some customers.
In Florida and Ohio, insurers have sought and been authorized to raise rates by at least 20 percent for some policyholders. Such rate hikes can amount to hundreds of dollars in increased costs, a devastating financial hardship for workers and their families. Premiums for employer-based policies are set to rise by about 4 percent nationwide, still a significant increase.
In New York, where regulators have more power to hold down rates, premium increases for 2013 in the individual and small group market have been held below 10 percent. Again, this is still a sizeable hike in rates, and it comes as health care cost increases appear to have actually fallen off somewhat in recent years, mainly due to the sluggish economy, forcing many people to put off medical treatment.
The Times notes that PricewaterhouseCoopers estimates that health care costs are estimated to increase by only about 7.5 percent in 2014, far below the double-digit increases being requested by some insurers. Provisions in the ACA are basically toothless in regulating private insurers’ insatiable appetite for increased profits.
According to the federal analysis reviewed by the Times, 36 percent of requests by insurers nationwide to raise rates by 10 percent or more were found by regulators to be reasonable, while 26 percent were found to be unreasonable. Insurers modified their requests in 26 percent of cases, and withdrew their requests in 12 percent.
Even in those cases where regulators have found the requests to be unreasonable, a number of insurers have gone ahead and raised the rates. According to the advocacy group Consumer Watchdog, two insurers in nine states proceeded with rate hikes despite being cited by federal officials for excessively raising insurance premiums.
While the premium hikes are hitting the individual and small business markets the hardest, workers with employer-based insurance are feeling the squeeze in other ways. To reduce spending on health care, companies are raising deductibles or co-payments on office visits, emergency care, prescriptions and other services, placing more of the burden on employees.
A study in Contingencies, the magazine of the American Academy of Actuaries, finds that under changes required by the ACA, premiums for young, healthy individuals between the ages of 21 and 29 who are not eligible for government subsidies stand to rise by more than 40 percent. Individuals aged 30 to 39 not eligible for premium assistance would see an average premium increase of 31 percent.
This projected staggering increase is mainly due to a provision in the ACA referred to as “age band compression,” which means that younger, healthier people will pay more for their coverage in order to keep rates down for older segments of the population. As with other aspects of the health care overhaul, the regulations may marginally reduce the impact on one or another segment of the population, but are overwhelmingly stacked in favor of the private insurers, who will raise premiums overall in order to comply with the regulations.
Under another provision of the health care law set to go into effect in 2014, insurers will no longer be permitted to consider the health of prospective policyholders before deciding whether to offer coverage or what to charge for it. As insurers will no longer be able to cherry-pick their customers, they can be expected to see this as another reason to request and impose insurance rate hikes.