Health insurers boosting rates will hurt small businesses and individuals

Rising health insurance premiums only point to the wisdom of reform.

January 10, 2013 

Health insurance companies across the United States are seeking increases in premiums that most acutely affect small businesses and individuals who buy their own coverage, though it appears the companies won’t leave many untouched. The increases would vary widely by location depending on a state’s ability to limit them.

In North Carolina, the state Department of Insurance must approve rate increases in advance after a review process, which discourages inflated rate increases. Some companies in fact have lowered their requests or even abandoned them during the process.

The state requires companies to demonstrate that they have adequate resources to pay claims, that their requests are not excessive and that they are not discriminatory. Estimates vary on where North Carolina’s health insurance rates rank in the nation, but the strong Department of Insurance oversight is a benefit to consumers.

That’s quite a contrast to California, where rate increases can be reviewed but not denied. In New York, rate increases are strictly controlled, and 2014 hikes for individuals and small groups (such as small businesses) have been held to under 10 percent.

A stronger law?

As The New York Times reports, there’s a touch of irony in California’s loose-reins policy: In 2010, an outrageous 39 percent increase sought by Anthem Blue Cross helped spur the Affordable Care Act, or Obamacare, as Republicans prefer.

In other states, insurers have been going for rate hikes in double digits, 20 percent or more in some cases, which The Times notes can mean hundreds of dollars a month for policy holders.

Dave Jones, California’s insurance commissioner, says a loophole in the Affordable Care Act allows what he believes are improper rate hikes. What’s needed, Jones says, is a federal law that allows all regulators, meaning all states, to deny rate increases they deem excessive. The Affordable Care Act does require, at least, more transparency on rate hikes, but it appears the law needs more teeth.

But give Obamacare credit for the fact that such transparency has apparently been a disincentive for some rate increases, according to the Kaiser Family Foundation, which monitors rates.

Rates and costs

Insurance companies say higher rates are needed to cover higher costs. (Part of the expense may be astronomical executive salaries, but what the heck?) Although health care reform, set to be in full throttle in 2014, has addressed important issues regarding insurance, it’s true that costs of care have skyrocketed. But there is strong evidence that the increases are slowing down.For one thing, Obamacare sets limits on profits and administrative costs and also provides for rebates for customers if insurance companies break those rules on expenses.

What’s really needed is a serious examination of ways to cut long-term costs of health care. That would include addressing the shortage of primary care physicians. It also would mean tackling the problem of inflated prices of drugs and some procedures at hospitals, where even the “nonprofit” institutions (evidenced by News & Observer reports on those in North Carolina) are making huge dollars off insured patients in the name of providing care for the poor.

It’s unlikely, of course, that a Republican-controlled U.S. House will ever allow more teeth to be put into the health care reform law as it stands. But as long as costs of care rise, so will insurance premiums.

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