Tuesday, July 7, 2015

Health Insurance Companies Seek Big Rate Increases for 2016 - The New York Times

Health Insurance Companies Seek Big Rate Increases for 2016 - The New York Times

Comment by Don McCanne

Although it will be
about three months before we have the final health insurance premiums
for 2016, the information we have already can warrant a few preliminary

*  The Affordable Care Act
appears to have failed on delivering its promise of controlling global
health care costs. The primary reason given by the insurers when
submitting requests for much higher premiums for 2016 is that health
care costs were much higher than their actuaries anticipated.

 Some complain that new enrollees were less healthy and thus drove
spending up, but under the individual mandate, increases in enrollment
were across the board and not concentrated amongst the less healthy.

 There may have been some pent up demand amongst new enrollees (e.g.,
joint replacement) but that is only a transient surge which does not
warrant long term premium increases. Much of the pent up demand will
have been ventilated as most of the remaining uninsured are ineligible
by immigration status or by personal hardship. The numbers who are
eligible but decline coverage will only trickle in as health care needs

*  It appears that the increases in
the benchmark silver plans will not be as great as the increases
currently receiving considerable publicity. Requests over a ten percent
increase were required to be made public whereas increases under ten
percent will not be known until plans are marketed prior to the November
1 beginning of open enrollment.

*  Because
rate increases vary considerably amongst the plans, many individuals
will be forced to choose between paying higher rates by staying in their
current plans or changing to plans with lower rates but with different
narrow provider networks thereby potentially sacrificing continuity of

*  Respected institutions such as
Geisinger in Pennsylvania and Scott and White in Texas are asking
staggering premium increases, indicating that the supposed cost
containment features of ACA are having a negligible impact on legitimate

*  Little is being said about the
insurance underwriting cycle. Large, well capitalized insurers are able
to price their products more competitively, decreasing the market
presence of less competitive insurers. Once market dominance is
established, insurers are free to drive up premiums as much as 20 to 40
percent, as reported in this New York Times article. The regulated
medical loss ratios are generous enough to allow market performance
(profits) to excel, as confirmed by current Wall Street activity in
health insurance equities.

So are we going to
wait until October when the premium rates are announced, and then do
nothing other than continue to stand back and observe because the
insurers will reassure us that silver benchmark plans didn’t go up that
much - maybe 4.4 percent - even if it means that the enrollees have to
switch plans and find new providers in a different narrow network? Is
this the good that’s coming out of all of this? What about those who
want to continue with their current providers, but face a 20 to 40
percent premium increase? Will the death spiral bleed over from insurers
to patients?

Enough. Single payer.

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