Health Insurance Rates Spike Despite Slow Health Cost Growth

For the past three years the rate of increase in health spending has been only 3.9%, but double-digit health insurance rate hikes are hitting small businesses and people who must buy insurance on their own. The disparities of this phenomenon are shocking. Families with employer-based policies are seeing increases of only 4%.

The rate of increase in health spending, which was 3.9% in 2011, was the same low rate as in 2009 and 2010. The moderation is remarkable, given the large annual healthcare spending increases that occurred for the last two decades. These are actually the lowest annual rates recorded in the 52 years the government has been gathering such data. Whether this is as a consequence of more people without insurance or continuing effects of the recession, the limited spending growth has cheered government officials and policy makers.

Insurance companies are asserting that the rate increases are due to higher healthcare costs. But given the statistics above and lower hospital costs in the last few years, it is easy to be skeptical. Insurance companies are seeking and winning double-digit premium increases despite the coming launch of the Affordable Care Act, which was created in part to help curtail such a rapid rise in insurance costs for consumers.

Most vulnerable to the high rates are small businesses and people who have no employer-provided insurance and must purchase insurance on their own. In California, for example, Aetna has proposed rate increases as high as 22%, Anthem Blue Cross 26%, and Blue Shield of California 20%. These rate requests are all the more remarkable after a 39% rise sought by Anthem Blue Cross in 2010, a rate increase that helped provide an impetus to create the Affordable Care Act.

A loophole in Affordable Care Act is becoming clear, because the review of insurance rate increases happens at the state level. Some state regulators have the authority to revise or deny proposed rate increases, while other states do not. California can evaluate rate requests for technical errors but cannot deny rate increases, and because of this, California consumers are continually hit with large rate increases. New York is one of 37 other states that have given regulators some authority to disallow or roll back rates considered excessive.

Click here to read the New York Times article “Growth of Health Spending Stays Low” or here for Reed Abelson’s New York Times article “Health Insurers Raise Some Rates by Double Digits.”

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