Slashing health insurance rate hikes, keeps costs ‘essentially flat’ or not so much

I posted this only beause it illustrates popular misconceptions about health insurance. Simply not allowing a premium increase does not keep costs flat as claimed in the headline. Nobody is getting a break.

Premiums being set for all of 2021 are intended to reflect the cost of health care provided through all of next year (when it’s quite likely costs for care delayed in 2020 will be incurred).

Lower spending in the first half of 2020 is hardly a reflection of costs a year and more hence. Consumers will not save a penny that does not actually occur over the next sixteen months…but it makes good press.

Connecticut health insurance policyholders, reeling in a recession caused by the coronavirus, are getting a break in 2021 rates, due partly to reduced use of health care services in the pandemic.

The state Insurance Department announced Friday it cut requested rate increases for individual plans marketed on the state’s health insurance exchange, keeping costs “essentially flat,” with an average rise of 0.01%. That was down from the average requested increase of 6.3%. For small group plans, or employers with 50 or fewer workers, the average approved increase is 4.1%, down from more than 11.3% requested on average.

About 214,600 consumers could expect to save $96 million, the Insurance Department said. Regulators said they reduced the upward trend in health care costs that insurers project at 8.8% this year and in 2021 as prescription drug costs rise and demand increases.

The Insurance Department said it blunted the rise to reflect reduced use of services, including elective procedures, in the first half of this year due to the pandemic and the projected impact of COVID-19 in 2021.

Source: Connecticut slashes health insurance rate hikes, keeps costs ‘essentially flat’ for policyholders coping with recession and COVID-19 – InsuranceNewsNet

2 comments

  1. It says: “… The state Insurance Department announced Friday it cut requested rate increases for individual plans marketed on the state’s health insurance exchange, keeping costs “essentially flat,” with an average rise of 0.01%. That was down from the average requested increase of 6.3%. For small group plans, or employers with 50 or fewer workers, the average approved increase is 4.1%, down from more than 11.3% requested on average.

    OK, once more, with Gusto – averages can be deceiving! Averages can be deceiving!

    My plan has a rate of $2,000 a month.
    Dick’s plan has a rate of $1,000 a month.
    Dwayne’s plan has a rate of $500 a month.
    Total premium, $3,500 a month.

    My plan goes up 20%, to $2,400 a month.
    Dick’s plan goes down 10%, from $1,000 to $900.
    Dwayne’s plan goes down 10% from $500 to $450.
    Total premium is $3,750, but the average increase was 0%.

    And, if in fact 25% of folks delayed care, regardless of the premium that is charged for 2021, because of the MLR rebates under PPACA, it’s not like the insurance companies pocketed the difference or set the monies aside in reserves. So, if folks tack on that 25% in 2021 and fully utilize the “normal” level of services for the two year period 2020 – 2021, and then you tack on COVID costs, it means the insurance companies will need to raise rates well in excess of 25% in 2022.

    Much more likely is that the state will do what they can to jawbone and curtail increases, meaning that you will see dramatic increases in point of purchase cost sharing. In the individual market, what that all means is that taxpayers will end up shouldering much of the cost (in addition to their own premium increases), because almost everyone in the individual marketplace receives taxpayer financial support. That is, unless something has dramatically changed, 87.7% of enrollees get taxpayer subsidies (9.3MM of 10.6MM, 1st Quarter 2019) – see: https://www.kff.org/private-insurance/issue-brief/data-note-changes-in-enrollment-in-the-individual-health-insurance-market-through-early-2019/

    The real number, however, is that 73.5MM Americans were enrolled in Medicaid/CHIP in May 2020. Of that number, about 15MM are from the 2/3rds of states who expanded Medicaid eligibility. In other words, the enrollment in Medicaid is about twice that of the group enrolled in the public exchange in states that expanded Medicaid eligibility. See: https://www.medicaid.gov/medicaid/program-information/medicaid-and-chip-enrollment-data/report-highlights/index.html

    Yes, Virginia, there is a Santa Clause when it comes to health care coverage, and it is the taxpayers. They are footing much of the cost of their own coverage (through reduced wages in exchange for employer-sponsored coverage), or through funding 100% of the cost of Medicare Part A Hospital via payroll taxes (FICA-Med, employer nominally paid, employee paid on an after income tax basis), or through funding 3/4ths of Medicare Part B (physician, other) and Medicare Part D (Rx) for 67.7MM, and by funding 100% of the cost of the 73.5MM in Medicaid. In other words, directly or indirectly, of the 147MM people employed in August 2020, just under 100MM were offered employer-sponsored coverage, and perhaps 70+MM were actually enrolled in their own employer’s plan … that 70+MM were paying their costs, as well as their share of the cost to provide coverage for 68MM in Medicare and the 73MM in Medicaid. Those workers who did not enroll in employer-sponsored coverage, about 75MM, paid the FICA-Med as well as their share of general revenue (income) taxes to fund the 68MM in Medicare and 73MM in Medicaid.

    In fact, in terms of the impact on take home pay, a majority of American workers with wages of less than $50,000, paid more in taxes for other’s health care coverage than they paid for their own, employer-sponsored coverage. In 2019, according to Kaiser, the average cost for single employee contributions was $103 per month (pre-tax), meaning about $75 a month, after tax. Again, averages are deceiving, the median amount for those actually covered was substantially less. The Medicare premium for an individual, employer and employee earning $50,000 is $120, and adjusted for taxes (employer payments are not imputed to employees as income), the impact on take home pay is approximately $103 per month.

    Some deal. And, if Americans elect Biden, those age 60+ will become eligible for Medicare (leaving employer-sponsored and public exchange coverage), and we will see a public option in the exchanges … likely to further shift the cost onto working Americans.

    Liked by 1 person

  2. He are my predictions. Reduced services during the covid-19 pandemic has delayed cared which will result in more expensive treatments in the next year or so. It is already known that children did not get their childhood vaccines. How many adults didn’t go to the doctor for minor things because they were scared or weren’t allowed, or there were no office hours. My son is just starting to get his medical and dental work done that were delayed 6 months.
    The bill for covid-19 has not come in yet. Today, on one of the websites, I read about price gouging on covid-19 tests. Congress mandated that the insurance companies pay 100% of the costs, no questions asked. The test costs ranged from $51 to over $10,000, and all were paid. The $10,000 charge was for a doctor who was tested and paid by his insurance company. He promptly quit the ergent care practice when he found out what they charge. These charges will be tallied and reflect a big jump in rates next year for 2022, since 2021 rates are being set right now for fall registration of most employers health insurance plans. It might be too late for some plans to make the adjustments.
    Everytime you get a cold, you have to be treated like you have covid-19 until test come back otherwise. Some tests are wrong 33% of the time but you never know which one you are getting until the results are reported. In the meantime you’ll have to quarantine. Somebody will have to pay for all the PPE and extra precautions while you are being treated. So the costs of covid-19 will not go away this year or next year.
    Cutting the rate request will only cause a bigger double digit jump next fall or some insurance companies might pull out of the market altogether. So how is this helping?

    Liked by 1 person

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