By Truman Lewis
ConsumerAffairs.com
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HHS Chief Kathleen SibeliusAetna and some BlueCross Blue Shield plans, not to mention many smaller carriers, are seeking rate increases ranging from 1% to 9%, claiming they need the extra income to pay for new benefits required under the healthcare overhaul.
This is not what cash-strapped families need to hear, not after a report earlier this month by the Kaiser Family Foundation and the Health Research & Educational Trust (HRET) found that families are already paying an average 3% more for health coverage this year, The Wall Street Journal reported recently.
Nor is it what Democrats want to hear after staking their political fortunes on the healthcare bill adopted after a brutal fight in Congress last March. The Obama Administration was quick to challenge the insurance companies, sending forth Health and Human Services chief Kathleen Sibelius to warn insurers they were playing a dangerous game.
"There will be zero tolerance for this type of misinformation and unjustified rate increases," Sibelius warned in a letter to Karen Ignagni, the top lobbyist for the insurance industry. "We will not stand idly by as insurers blame their premium hikes and increase profits on the requirement that they provide consumers with basic protections."
Ignagni, president of America's Health Insurance Plans, said in response that it's "a basic law of economics" that additional benefits incur additional costs. She blamed higher premiums on the rising costs of medical care and the impact of consumers dropping their insurance coverage because of economic instability and job losses.
In her letter, Sibelius argued that the potential economic impact of the new health plan should be minimal.
"We estimate that that the effect will be no more than one to two percent. This is consistent with estimates from the Urban Institute (1 to 2 percent) and Mercer consultants (2.3 percent) as well as some insurers estimates," she said. "Moreover, the trends in health costs, independent of the legislation, have slowed. Employers premiums for family coverage increased by only 3 percent in 2010 a significant drop from previous years."
But Aetna claims that the extra benefits provided in the legislation forced it to seek rate increases for new individual plans of 5.4% to 7.$% in California, with similar increases likely in other staets. In Oregon, the BlueCross BlueShield provider said small employer plans might see premium increases of 17.1%.
Basic problem
A basic problem is that, at the moment, it's difficult for regulators to intervene when insurance companies request rate hikes. Insurance is regulated at the state level and in about half the states, rate hikes are granted automatically if the insurer can provide evidence that they are justified.
That could change, however. Sibelius warned that the Obama administration may block companies from participating in the new marketplace for insurance coverage if it decides they have raised premiums unreasonably.
The new law sets up state-run insurance exchanges that, beginning in 2014, would provide coverage for individuals and small employers.
It is precisely those policyholders who have already been hard-hit by rising premiums, according to the Kaiser study, which also found that many employers are shifting more of the cost of their health coverage to their employees, so that workers see rising costs even when premiums are relatively stable.
Workers on average are paying nearly $4,000 this year toward the cost of family health coverage -- $482 more than they paid last year, the study found.
Since 2005, workers' contributions to premiums have gone up 47 percent, while overall premiums rose 27 percent, wages increased 18 percent, and inflation rose 12 percent, the report noted.
Many employers are also raising the annual deductibles workers must pay before their health plans begin to share most health care costs. A total of 27 percent of covered workers now face annual deductibles of at least $1,000, compared with 22 percent in 2009, the survey said. Among small firms (3-199 workers), 46 percent face such deductibles.
What to do
What's a consumer to do? Unfortunately, there's no easy answer. While it's easy to say we should all eat right, smoke less and stay fit, that's no consolation to those who can't afford or can't get health insurance because of pre-existing conditions, job loss or other problems. The healthcare bill is intended to extend insurance protection to all; the question is whether it can do that without making insurance even less affordable for the average consumer than it is now.
The most affordable policies are generally so-called HMO plans, like those offered by Kaiser. See what our readers have to say about various companies here.
