It’s rate increase season again
I cannot count how many stories I’ve written about health insurance rate increases. But I can tell you the story line rarely changes-
- Health insurance companies requests double digit (or nearly double digit) rate increases.
- 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?
- 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.
- 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 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.
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.