Tuesday, June 22, 2010

Health Care Premiums Starting to Rise

In a recent survey released Monday by the the Kaiser Family Foundation. (KHN is a part of the foundation.)

The foundation surveyed just over 1,000 people who don't get insurance from their employer. finding that people who own their own health insurance report the most recent rate increase requests have averaged 20 percent.  77 percent reported an increase and 16 percent of them switched to less expensive plans. As a result of those who switched, the average increase for all respondents was 13 percent.

It easy to say insurance premiums rise every year, however not a 20% clip, the rate in the past was generally around 10%.

Insurers are blaming rising medical cost as the driving force.  I predicted in an earlier blog the increase was inevitable.  My reasoning was not due to increase in medical cost, but rather due to the health care reform law.

One aspect of the law is guaranteed insurability.  This law prevents insurance from charging higher premiums on those that have health issues, that's great for the sick but bad for the healthy.  Insurance companies need to raise the premiums somewhere to cover the cost of the sick so the healthy get zapped.  In other words lower premiums for those with health issues and higher premiums for those that are healthy.

In a recent article in the New York Times Today, it was reported that the Obama administration is set warn the insurance industry against imposing hefty rate increases. The White House is afraid that insurance carriers would blame the new law, i do not believe that would be the initially as the carriers do not want to deal with the government at this point and would just continue to blame rising medical costs.

“Our message to them is to work with this law, not against it; don’t try and take advantage of it or we will work with state authorities and gather the authority we have to stop rate gouging,” David Axelrod, Mr. Obama’s senior adviser, said in an interview. “Our concern is that they not try and, under the cover of the act, get in under the wire here on rate increases.”


Insurers have warned since early in the debate that the overhaul might result in increased premiums for many consumers. Based on risk analysis if you have to have an unhealthy individual with a low insurance premium on the books, you would need to increase several health individual premiums to make up the loss. 

Maintaining a health life style would become meaningless from a health insurance policy prospective as all would be charged the same premium.  You work hard to keep your self healthy and pay for those that don't.  There are obvious outliers to this comment as i am not talking about issues that cannot be prevented.

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