We’re paying more and getting less when it comes to health insurance. A survey by the Kaiser Family Foundation found that premiums for employer-sponsored coverage jumped by 9% for families and 8% for individuals this year. Last year, family premiums rose by only 3%, and over the past few years, increases have stayed below 5%. (Click here for the full report)
Our coverage is also shrinking. Many more workers have policies with deductibles of $1,000 or more. Co-pays are also going up. And workers at many companies must pay a higher share of the total premium.
This finding is somewhat surprising, since underlying health care costs rose at a slower pace than usual last year. A Standard & Poor’s survey found an increase of just under 6%, the lowest rate of growth in the past six years.
So, who’s to blame? Insurance companies are an obvious suspect. Some see them trying to pad their profits. Others charge they are rushing to raise premiums before more vigorous rate regulation kicks in under health reform.
The Standard & Poor’s survey suggests that, at the least, private insurers have been inefficient. When they pulled apart the 6% overall increase in health care costs, they found that costs covered by private insurance rose by 7.72%, while those covered by Medicare rose by only 2.35%.
Insurance companies respond that while underlying cost increases moderated last year, the pace will pick up again when the economy turns around. It remains to be seen whether that occurs. If it does not, insurance companies will have some explaining to do.
The other prime suspect is, of course, “Obamacare.” Critics see the insurance price hikes as proof of its ill effects. Kaiser agrees, but only up to a point. They say that about 1 to 2% of the rise is due to health reform.
Why would health reform have this effect? Because it forced insurance companies to give us better coverage. Policies no longer include annual or lifetime caps on benefits, and they have to cover more preventive services, like mammography.
They also have to cover more people, like dependent children up to age 26.
Almost a million more young people now have health insurance as a result.
No one wants to pay 2% more for anything. But do we really want to go back to a system in which patients with serious illnesses saw their coverage stop while they still needed expensive treatments? Or one in which a million young adults were locked out of coverage?
And it’s not surprising that health reform has hasn’t lowered insurance costs. Its main cost control provisions haven’t gone into effect yet. Insurers are about to face limits on the amount they can spend on non-medical expenses, and individual policies will be subject to more vigorous rate review. But you can’t expect those provisions to do much until after they have been fully implemented.
Whoever the culprit is behind this year’s premium increases, the problem goes much deeper than a one-year phenomenon. Kaiser found that over the past ten years, premiums rose by 113% and the share paid by workers by 131%. During the same time period, wages went up by only 34%.
Without serious action to address long-term trends in underlying costs, the health care we are used to getting could soon become unaffordable.
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