Insurers Hike Rates as Result of Health Reform Bill
September 19, 2010 · Posted in General Economics
The “Affordable Health Choices Act of 2009″ is making good on its title by accomplishing, as any government program, the exact opposite of the stated objective:
Health insurers say they plan to raise premiums for some Americans as a direct result of the health overhaul in coming weeks, complicating Democrats’ efforts to trumpet their signature achievement before the midterm elections.
Aetna Inc., some BlueCross BlueShield plans and other smaller carriers have asked for premium increases of between 1% and 9% to pay for extra benefits required under the law, according to filings with state regulators.
These and other insurers say Congress’s landmark refashioning of U.S. health coverage, which passed in March after a brutal fight, is causing them to pass on more costs to consumers than Democrats predicted.
The rate increases largely apply to policies for individuals and small businesses and don’t include people covered by a big employer or Medicare.
About 9% of Americans buy coverage through the individual market, according to the Census Bureau, and roughly one-fifth of people who get coverage through their employer work at companies with 50 or fewer employees, according to the Kaiser Family Foundation. People in both groups are likely to feel the effects of the proposed increases, even as they see new benefits under the law, such as the elimination of lifetime and certain annual coverage caps.
Many carriers also are seeking additional rate increases that they say they need to cover rising medical costs. As a result, some consumers could face total premium increases of more than 20%.
While the increases apply mostly to the new policies insurers write after Oct. 1, consumers could be subject to the higher rates if they modify their existing plans and cause them to lose grandfathered status.
The rate increases are a dose of troubling news for Democrats just weeks before an election in which they are at risk of losing their majority in the House and possibly the Senate.
In addition to pledging that the law would restrain increases in Americans’ insurance premiums, Democrats front-loaded the legislation with early provisions they hoped would boost public support. Those include letting children stay on their parents’ insurance policies until age 26, eliminating co-payments for preventive care and barring insurers from denying policies to children with pre-existing conditions, plus the elimination of the coverage caps.
Yes, when you outlaw the denying of policies to people with pre-existing conditions, then costs will go up as a result. That’s not such a tough one to figure out, folks. Did the legislators expect something else to happen? Of course they didn’t. Do they care? Of course they care … about beefing the bill up with things that sound good at first glance, making it appealing to the public to push it through quickly as possible. Do they care about what happens thereafter? Why, of course they do. They care about granting access to positions, offices, projects, and cash to those who invested money in the legislators writing the laws (a.k.a lobbyism).
Now, I can already hear people object: “But Niiiima, health costs were always going up, you are now blaming Obama/Democrats for something that has been happening regardless.” OK, but my point is that these people claimed, and a lot of gullible people listened, that it will be THEY who will make health care more affordable and THEY who will make it universal and bla bla bla.
Republicans and Democrats alike have both been instrumental in socializing the US health care system over the past century. I don’t blame one party more than the other. I blame the idea that a system of organized and centralized aggression can ever be sustained. I support peace and non-aggression as a solution. During abolitionism, people didn’t replace mean slave masters with kinder ones. They abolished the system of slavery, period.
Why will this bill not make real rates drop, at least not lastingly? Because none of the fundamental issues of the health system have been solved while a lot of them have been aggravated through this legislation. As I explained before:
But without addressing the 3 steps I outlined above, all other efforts will be completely and absolutely futile. Without addressing the root of high health care costs, it does not matter whether we let government alone take care of health insurance, or whether we completely liberalize the health insurance market. Nothing would change substantially. We would still be paying high premiums that go into a pool that pays for overly expensive health care products and services. We would still be faced with an inherent shortage of health care goods and services.
Weeks before the election, insurance companies began telling state regulators it is those very provisions that are forcing them to increase their rates.
Aetna, one of the nation’s largest health insurers, said the extra benefits forced it to seek rate increases for new individual plans of 5.4% to 7.4% in California and 5.5% to 6.8% in Nevada after Sept. 23. Similar steps are planned across the country, according to Aetna.
Regence BlueCross BlueShield of Oregon said the cost of providing additional benefits under the health law will account on average for 3.4 percentage points of a 17.1% premium rise for a small-employer health plan. It asked regulators last month to approve the increase.
In Wisconsin and North Carolina, Celtic Insurance Co. says half of the 18% increase it is seeking comes from complying with health-law mandates.
The White House says insurers are using the law as an excuse to raise rates and predicts that state regulators will block some of the large increases.
“I would have real deep concerns that the kinds of rate increases that you’re quoting… are justified,” said Nancy-Ann DeParle, the White House’s top health official. She said that for insurers, raising rates was “already their modus operandi before the bill” passed. “We believe consumers will see through this,” she said.
Previously the administration had calculated that the batch of changes taking effect this fall would raise premiums no more than 1% to 2%, on average.
After Regence mailed a letter notifying plan administrators of its intention to raise group insurance rates in Washington state, the White House contacted company officials and accused them of inaccurately justifying the increase. Kerry Barnett, executive vice president for Regence BlueShield, said the insurer is changing the letter to more precisely explain the causes of the increase.
The industry contends its increases are justified. “Anytime you add a benefit, there are increased costs,” said Karen Ignagni, president of America’s Health Insurance Plans, the industry’s lobbying group.
Massachusetts, which enacted universal insurance coverage several years ago, also has seen steadily rising insurance premiums since then. Proponents of that plan attribute the hikes there to an overall increase in medical costs, while insurers cite it as a cautionary example of what can happen when new mandates to improve benefits aren’t coupled with a strong enough provision to force healthy people to buy coverage.
Republicans, who have sought voter support by opposing the health law, say premium increases could help in November’s congressional races. “People are finding out what’s in [the law], they don’t like it, and I think it’s going to play a big factor in this election,” said Iowa Sen. Charles Grassley, the top Republican on the Senate Finance Committee.
About half of all states have the power to deny rate increases. Ms. DeParle pointed out that the law awards states $250 million to bolster their scrutiny of insurance-rate proposals, saying that will eventually curb premiums for people.
“In Kansas, I don’t have a lot of authority to deny a rate increase, if it is justified,” said Kansas Insurance Commissioner Sandy Praeger. She recently approved a 4% increase by Mennonite Mutual Aid Association to pay for the new provisions in the health law.
The process of reviewing rate increases varies by state. For instance, Ms. Praeger said she can deny only rate increases that are unreasonable or discriminatory.
Some regulators say not all insurers have adequately justified their increases. “A lot of it is guesswork for companies,” said Tom Abel, supervisor at the Colorado Division of Insurance. “I was anticipating the carriers to be more uniform.”
Regence BlueCross BlueShield of Oregon, which estimates its increase covers 57,000 members, said its goal is to “anticipate the financial needs of our members as accurately as possible and to collect just enough premiums to cover costs,” said a spokeswoman. Other insurers offered similar explanations or declined to discuss their increases.
A small number of insurers have submitted plans to lower rates and cite the new mandates in the legislation as the reason. HMO Colorado, a Blue Cross Blue Shield plan owned by WellPoint Inc., submitted a letter to state regulators saying small group rates would fall 1.8% starting Oct. 1 because of changes from the law.
Democrats had hoped to sell the bill in the fall elections. But in recent weeks, some Democrats who voted for the bill have shied away from advertising that fact, while the handful of House Democrats who cast “no” votes see it as a potential boost to their re-election bids.
“I think it’s a question of short term versus long term,” said North Carolina Insurance Commissioner Wayne Goodwin, a Democrat up for re-election in 2012. “Thankfully we’re seeing people get more coverage and protections than they’ve ever had before. But until we see the medical-cost inflation affected, you’re likely to see rate increases as long as they are not excessive and in violation of the law.”
… and, dear Mr. Goodwyn, how is this magical “medical-cost inflation” going to be “affected”? Are you going to pray for it? Perform a rain dance? Are you hoping that it’ll just happen somehow somewhere out of the blue? Are you going to will it to happen? Should we maybe write some letters to our health care and pharmaceutical companies asking if they could be a bit nicer and maybe make their goods cheaper?
Haha … you people have got to be kidding !
I am not sure what more I can add than all the things I already wrote, predicted, explained, and reasoned out on the matter of health care. Feel free to explore the links below …