20-30% premium increases for health insurance?

2017 Obamacare premiums are not going to be pretty.

Following is what a Pennsylvania newspaper said about higher premiums expected in marketplace health insurance plans. As premiums come in later this year there will no doubt be great political rhetoric bashing insurance companies. The Obama Administration has no idea about premium hikes and state insurance commissions are no better.

Comments from consumers only muddy the water and are irrelevant.

Rate hikes have to be approved by the Pennsylvania Insurance Department. The department said it will be taking a look at the issue beginning in June.

“Review those rates, take comments from consumers, and we will look at what the companies sent us and ask them questions,” said Ron Ruman, spokesperson for the Department of Insurance.

The Obama Administration has called the anticipated premium hikes quote premature and overblown. Some experts said their best advice is to start saving now to prevent potential sticker shock later.

imageThe fact is premiums must cover actual costs; past, present and future. If premiums did not cover claims for the past year they must be set first at a level to recoup the loss and on top of that to cover the expected claims for the next year. You can dispute the assumptions used by insurers for next years claims costs, but sooner or later they will be covered. Premiums must also cover required reserves for future claims and all other expenses.

Insurance company A may be more efficient in its operations than B to be more competitive in setting premiums. And that’s the name of the game. Any insurer must fully cover claim costs which are the bulk of premiums (at least 80% by law and often more) and cover all other costs and a profit which is part of the 80%, typically a small part.

An insurer that requests exceptionally high premiums does itself no favor if it is not competitive in the marketplace.

img_0311Likewise, artificially setting premiums too low merely delays the day of reckoning.  Simply put, the sickest people will pay higher premiums and healthy people will not. The political focus on premiums did us no good. To deal with pressure from regulators focused on premiums insurance companies had to raise  deductibles and out-of-pocket costs which creates another affordability problem.

Not only must insurers accurately predict the claims to be incurred by the current members in the future, they must attempt to predict the health risks of any new members in the coming year. Will they have more or less healthy customers?  It’s not easy and regulators are as much in the dark as the insurance company actuaries while regulators care only about the immediate political fallout from premium increases.

The simple truth is that if you look at all the components of Obamacare that directly affect health care costs and premiums, it is poorly designed, cannot possibly deliver affordable health care and cannot continue as it is currently structured.

Do a scan today for articles on Google and you will find that states, municipalities and companies are struggling with health care costs just as they were in 2008 and before. Nothing has changed except added regulatory and administrative burdens and higher taxes and other higher costs… and greater cost-shifting to workers. Any success claimed for the Affordable Care Act does not include “affordable.” 


1 reply »

  1. >>> and greater cost-shifting <<< that is the key. My insurance rates (same policy) have more than tripled since Mr. Obama rose to power, and I have never made a claim. Not due to profits for the mean insurance company, my company is a non-profit. It's cost shifting, and helps to answer the question of why O'care is so unpopular even after years of subsidies.


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