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Health Insurance Premium Update

Health Insurance Premium Update

Health Insurance Premium Update | The White House.

First, the Office of Personnel Management announced that the average premium for the 8 million people enrolled in the Federal Employees Health Benefits (FEHB) program will increase by 3.8 percent in 2012, nearly half of the 7.3 percent increase in premiums for 2011.  The premium increase for the popular Blue Cross Blue Shield Standard Plan will be only 1.6 percent for 2012.

 

Second, the Kaiser Family Foundation released its annual survey on health insurance premiums, which found that that premiums increased by 9 percent in 2011.When evaluating the Kaiser study, it’s important to remember a few important facts:

 

High Insurance Company Profits. The Kaiser report shows that premiums increased 9 percent in 2011. These premiums were generally set in 2010, when insurance companies thought medical costs would be significantly higher than they turned out to be. The Bureau of Labor Statistics found that the health insurance employer cost index (a measure of the price of health care services) was the lowest it has been in over 10 years in the first half of 2011. Additionally, some insurers assumed  that the Affordable Care Act would dramatically raise their costs. In the end, both assumptions were wrong – but insurance companies still charged high premiums and earned impressive profits. Wall Street analysts’ review of results from the first quarter of 2011 found that 13 of the top 14 health insurers exceeded their earnings expectations, with profits that were over 45 percent higher than estimated.

 

Policies to Hold Insurance Companies Accountable Kicking In. Key Affordable Care Act policies are starting to take effect that make insurance more affordable. For example, insurance companies that want to raise premiums for 2012 by more than 10 percent will have to publicly justify their rate hikes. And a growing number of States have the power to reject unjustified premium hikes. Additionally, insurers are required to spend at least 80 percent of your premium dollars on medical care, rather than advertising, overhead and bonuses for executives. If they fail to meet that standard, they will be required to provide a rebate to their customers.

 

Other Key Statistics: Millions Already Helped by Reform. Other key statistics from the Kaiser report include:

  • 2.3 million young adults were added to their parents’ plan as a result of health reform.  This number is larger than the 1 million uninsured young adults who gained insurance since it includes those switching from an individual market plan.
  • 47 million Americans who get insurance at work were helped by the Affordable Care Act rule that ensures preventive care is covered without a co-pay or deductible. 31 percent of workers were in plans that added preventive services and 23 percent were in plans that lowered their cost sharing due to the Affordable Care Act.
  • Contrary to what opponents of the Affordable Care Act claimed would happen, 60 percent of employers continue to offer health insurance to their employees – compared to 59 percent in 2009. And when the law is fully implemented, employers will have new tools that will make it easier for them to provide benefits to their workers.

NeilS — Although the above material comes from White House itself and is sure to be biased, it is interesting to note a few things about insurance premiums and the Affordable Care Act (ACA). First, insurance companies predicted that the recovery would be much more robust and they were unsure how the ACA would affect their business. Naturally, the erred on the side of increasing premiums by far too much. Unfortunately for the Average American worker or business, insurance companies boomed while everyone else struggled to pay their bills. Surely it is obvious that profit-seeking behavior for insurance companies will lead them to deny claims, screen for preexisting conditions, and create so much red tape that nobody really knows what they are paying for or why. Instead of only paying claims for the people that need health care, they spend premium money on advertising, hoards of actuaries working on profit maximization models, and dividends for their shareholders.

Going forward though, insurance companies will have oversight dictating that only so much of premium intake can go towards these activities, and the rest must be used for actual health care. It makes sense then, that the last year they were able to make profits beyond the 80% threshold, they hiked rates through the roof! Going forward, I am betting that we see major benefits from this health care reform in terms of better, more reliable, and cheaper health care service. Hopefully we can use this legislation as a stepping stone to further enfranchise the 52 million Americans without health insurance. Just as an aside, every other developed country has already decided that health care should be universally provided to their population.

 

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