Observations on life

Health insurance premium increases in 2012 and beyond. Not sure where the truth lies.

The boat is sinking at a slower rate

According to a survey of employers by the Health Research and Educational Trust, 2012 is showing a 4% growth in the cost of family health plans.

Before you jump for joy, don’t put too much stock in these numbers. The fact is when you survey employers for such a number, many have no idea what their numbers really are or do they put much effort into getting accurate numbers when completing a survey. Trust me, I completed and conducted similar surveys for decades. Often completion of the survey is pushed off on a lower level person to complete. If the number is accurate, of course that is good news, but the actual increase in costs cannot be known for several months after year-end.

On the other hand, keep in mind that even a 4% increase is more than twice the rate of general inflation. Perhaps there is a reality check in all this.

The Department of Health and Human Services is promoting all the money the Affordable Care Act is saving Americans by limiting premium increases and generating rebates if the administrative expenses of an insurer exceed predetermined limits (80% or 85% of claims) called the Medical Loss Ratio (MLR). However, if you look closely at the government figures, the reality of the situation seems a bit at odds with the promotional hype.

For example, reviewing health care.gov where you can find both requested premium increases by state and the medical loss ratios by both state and insurance company, the numbers are quite different from the above survey (recognizing that many employer plans may be self-funded and large groups).

As reported by the government for 2012, no requested increase was less than 10% for California and the majority is in the 14% range with the vast majority approved as reasonable.

In Florida no requested increase is less than 11% with an average of 14% or more.

Illinois shows no premium increase less than 11% with many in the 20% to 40% range and most were found to be “reasonable.”

New Jersey had no requested increase less than 14%. Also in New Jersey I could find only one small insurer where the Medical Loss Ratio (MLR) did not meet the government’s minimum. All major insurers exceed the 80%-85% requirement and no rebates were generated.

New York had no premium increase request less than 10% with an average about 20%. Many in the 13% range were deemed reasonable.

Take a look at the information for yourself, the fact is that there is a great deal of hype in all this, but it appears the majority of premium increases above 10% are justified based on the insurers claims experience and that when it comes to large insurers, most of their products have a medical loss ratio that meets or exceeds government standards.

Keep in mind that a premium increase to cover a future period of time reflects more than the growth in the anticipated cost of health care services such as the cost of an office visit. Premium increases must also consider the number and type of services received by the insured which is a reflection of the health care status of those enrolled. Premiums reflect the level of coverage provided, including benefits mandated by law.

Categories: Observations on life

6 replies »

  1. Dick, I believe healthcare.gov only reflects rate increases of 10% or more – those that are “under review”. However, I suspect insurance companies raised rates on every health plan that met or exceeded the medical loss ratio threshold in 2011 – if only to make up for the refunds that PPACA required. That is, 2012 average increases anticipated the medical loss ratio rebates. My bet is that to the extent the government jawbones the rate increase down for a specific policy, other policies by the same insurer will see increases as necessary to recover the “negotiated” reduction in trend/rate increase (particularly if the rate increases on the other policies can be kept below a 10% renewal rate). And, of course, expect the insurer to adjust benefits before the renewal… What say you?

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    • Actually, it’s by an average of ten percent or more for individual and small group policies which makes it even more confusing to figure out what you are actually looking at on their site.

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      • My employer Health care cost for my family increased from ~$2500 last year to ~$5000 this year (100% increase). I don’t know the actual cost increase my employer has seen but the above is how much my yearly cost has increased. Both my wife and I are employed full time with employer health plans. Both employer’s my wife’s (Public school Nurse) and mine have seen the same increase rate of 100% (I work for a Large company). Is this a result of the affordable health care act? This is very scarey to both of us. I fail to see how anyone in our situation can support a President or Congress that enact legislation that results in this kind of increase. We both vote and will be voting in this election.

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      • There is no way such an increase would be caused by Obamacare. More likely your employer has required you to pay a larger percentage of the premium plus your plans have experienced some significant claims. It’s likely your coverage is self-insured and thus reflects claim costs not insurance premiums.

        The mandates now part do Obamacare add from 2% to possibly 5% to costs depending on the design of the group plan.

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      • I guess you missed the part about my wife and I both working for totally different employer’s.
        My wife works as a school nurse. I work for a large company. One private sector employer one public sector employer
        . Both have a minimum increase of 100% depending on the plan.

        I know you don’t believe this and most likely never will as will others that don’t see this increase, but many of our co-workers that have spouses working else where will reach the same conclusion some wouldn’t as they are hard core Democrat’s and could never believe its a result of there parties deceit. We are loyal to neither party and vote for different parties including independents. But I assure you its real for us and we will vote accordingly. I did get my plan first and incorrectly assumed it was my employer passing on more of the cost. Then when my wife received her plan we could only come to one conclusion. I did read on a government website that the Affordable health care bill wouldn’t cost anyone more than 8% of their total income. That’s an 8% increase in taxes for much of the middle class. For those making 400% or less of the poverty level their cost will be lower and in some cases they wouldn’t pay at all.

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      • I did not miss that point. However, I can guarantee that there is nothing going on with Obamacare that would cause anywhere near that type of increase. Think about it for a minute, what provisions are in effect or will be in effect in the future that could cause that. Most employers are seeing increases of 10% or less for 2013. There is more going on in your cases than anything to do with the law. You should ask the employers for an explanation.

        Dick

        Richard D Quinn Editor

        http://www.quinnscommentary.com

        Health Insurance Illuminated http://blog.horizonblue.com/

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