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It’s rate increase season again

June 8, 2011

I cannot count how many stories I’ve written about health insurance rate increases. But I can tell you the story line rarely changes-

  1. Health insurance companies requests  double digit (or nearly double digit) rate increases.
  2. No one is happy about this. Politicians  and people buying the health  insurance  say the requests are ridiculous.  No one can afford these costs! What other business increases its prices at this rate?
  3. The health insurance companies rarely talk on the record, but they will offer a written statement that essentially says these rates are just paying for the high cost of medical care.
  4. The Health Insurance Commissioner shaves some percentage points  off the rate requests (how severe that shaving is varies) and then usually (except for one time) approves them.

And around and around we go.  This time, Tufts is asking for an average rate increase of 4.8% for small and large businesses, Blue Cross wants 10.5%, and United wants an 18% increase for small businesses and a 20.1% increase for large.

As I reported, folks can testify on these increases at a meeting this afternoon at the Department of Labor and Training. Plenty of people have sent in written testimony already.

As you can imagine, no one supports the increases (except maybe the Rhode Island Business Group on Health, which says Tuft’s request is in line with their goals that increases be “limited to no more than absolutely necessary.”)

So why do these stories keep happening?  In a way, the health insurance companies are right- their costs reflect an incredible increase in medical costs.  Check out this chart from the Health Insurance Commissioner

Ok, so I know there are a lot of numbers here, but look at the section that says “portion of premium for medical costs.”  The range is 82% to 87%.  That means around 85% of each dollar the health insurance companies collect from your employer goes straight back into buying your medical care.

Even if the companies made no profits, no contributions to reserves, and paid nothing for their administrative fees, you’d still have that 85% that they need to pay medical bills.

I did a feature about this more than a year ago, but it’s worth trotting it out every time the rate increases come around.

Here’s how Jon Kingsdale with the Massachusetts Health Connector (MA’s version of a health insurance exchange)  explains the issue-

It’s sort of like blaming the gas station because the price of gasoline has all of the sudden gone up by fifty percent.  It’s similar economics,  most of the price you pay for gasoline is not what it costs the gas station to pump it, it’s the underlying cost of oil which the gas station has no control [over].

Most folks in the health care world won’t deny this.  But people like Lieutenant Governor Elizabeth Roberts say that’s no excuse.

The insurers need to be active participants here. They have the power to help to change that trajectory of cost in our  health care system. They can’t  simply turn around and say, ‘here’s the cost, you pay the bill.’ They need to be helping us focus on quality but also on cost, so these costs aren’t going up as quickly. It’s just unaffordable for people.

So what’s the solution to this constant increase in health insurance rates?  Some solution that acknowledges the role of everyone in this expensive health care system and involves a bit  of sacrifice.  See my earlier post on goats.

UPDATE: Here’s another written piece of testimony. This one is from Representative Teresa Tanzi opposing Blue Cross and United’s rate increases.

2 Comments leave one →
  1. E F permalink
    June 30, 2011 4:14 am

    I am a RI resident who has carried health insurance as an independent contractor for the past 9 years, through the state wide monopoly carrier known as (non profit) Blue Cross Blue Shield of RI.

    Unfortunately during these years, I and my family have been unable to afford any actual care for even routine health considerations, after paying the ever escolating exorbitant monthly premiums.

    Now like so many, I am no longer able to carry the current prohibitive rates. I long for the days of actual medical care for myself and family, before the current ridiculously hyper inflated, over managed drug, image and test happy immorality that healthcare has become.

    Honest hard working (and/or laid off) Americans are literally and quietly dying as a result of the current situation. I am, for one, ashamed of living to witness such a situation.

    I have also, in response, become radicalized with no fear of anything to lose in the restructuring of the entire financial cash cow of a health care system.

    Health insurance CEOs, boards, and lobbyists beware.

    • June 30, 2011 5:32 am

      Thanks for the perspective EF. What do you think this restructuring should look like?

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