Viewing entries tagged with 'Premiums'
MUST READ: Center for American Progress Study on the Personal Coverage Requirement
Posted by The Campaign on August 05, 2010 at 1:49 PM
In Case You Missed It: A new report released by the Center for American Progress, Health Care Reform Is a “Three-Legged Stool”, validates the need to pair an effective personal coverage requirement with insurance market reforms.
Here are a few highlights:
· Repeal of the requirement to buy insurance would mean more people would wait until they get sick to buy insurance in the new nongroup exchanges, which would increase the average premium by 27 percent in 2019.
· Retaining the law’s insurance reforms, but repealing the subsidies as well as the requirement to purchase insurance, would further discourage people from buying insurance when they’re healthy. Premiums in 2019 would cost twice as much as projected under the law as a result.
· Retaining the law but repealing the mandate would newly cover fewer than 7 million people in 2019 rather than the 32 million projected to be newly covered by the law. Federal spending, however, would decline by only about a quarter under this scenario since the sickest and most costly uninsured are the ones most likely to gain coverage.
· If insurance companies must charge the same price to people whether they’re sick or healthy many healthy people will view this as a “bad deal” and not buy insurance. This results in higher prices that chase even more people out of the market. The result is a “death spiral” that leads only the sick to purchase insurance at very high prices. Several states tried such community rating reforms—offering health insurance policies within a given territory at the same price to all persons without medical underwriting— in their nongroup markets over the past two decades, and sharp rises in insurance prices ensued along with rapidly shrinking market size.
FACT CHECK: What is Driving Premium Increases
Posted by The Campaign on June 22, 2010 at 11:19 AM
Fact Check: What Is Driving Premium Increases
“Insurance is still going to be expensive because healthcare is expensive.”
-- Gary Claxton, VP, Kaiser Family Foundation
(Reuters, 06/21/2010)
Underlying Medical Costs Drive Premium Increases
· Federal government data confirms that rising health care costs are driven by increased spending on hospital care, physician services, and prescription drugs. The government data[i] show:
o “Hospital spending growth is projected to have accelerated from 4.5 percent in 2008 to 5.9 percent in 2009, as spending reached $760.6 billion.”
o “Spending growth for physician and clinical services is expected to have accelerated to 6.3 percent in 2009, up from 5.0 percent in 2008, with expenditures having reached $527.6 billion.”
o “Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion.”
· Between 2000-2008, the growth in premiums tracked directly with the growth in benefits.
|
|
2000 |
2008 |
2000-2008 Growth |
|
PHI* Premiums |
454,784 |
783,157 |
72% |
|
PHI* Benefits |
402,802 |
691,179 |
72% |
Source: http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf
(see table 12)
Note: PHI = Private Health Insurance as defined by CMS
http://www.cms.hhs.gov/NationalHealthExpendData/downloads/quickref.pdf
*****
Health Plan Administrative Costs are Not the Cause of Premium Increases
· Health plan administrative costs increased at a slower rate than spending on prescription drugs, physicians and clinical services, hospitals, and total national health expenditures from 2000-2009.
· In 2009, the percentage of premiums that went towards administrative costs and profits declined for the sixth year in a row.
· The average yearly increase in health plan administrative costs from 2000-2009 was lower than the increase in spending on hospitals, physicians and clinical services, prescription drugs, and total national health expenditures.
Health Plan Profits Average Between 3-5 percent
“Insurance company profits in the large picture have very little to do with the overall rising cost of health care.”
-- Henry Aaron, Brookings Institution
(ABC News, 11/10/09)
· According to Yahoo! Finance’s latest analysis of quarterly financial data, the net profit margin for the entire health care sector is 15.48%. Using the same index, health plans have a 4.7% net profit margin.
o This ranks the health insurance plan industry 12th out of the 16 industries that make up Yahoo! Finance’s health care sector.
· Analyzing 13 health insurance plan companies on the Fortune 500 list, the profit margin for these 13 companies averaged 3.19 percent for 2009 -- for 2008 it was 2.3 percent for these same 13 companies.
o Six of the 13 companies actually saw a decline in their profit margin - averaging a decline of 48.7% in profit margin from 2008 to 2009.
· What experts say about health insurance plan profits:
o According to Kaiser Health News, “With the nation’s health care spending estimated at $2.5 trillion this year, even the elimination of insurers’ profits and executive compensation would lower health care spending by just 0.5 percent.”
o According to Ezra Klein of The Washington Post “The insurance industry is not a particularly profitable industry…That’s not to pretend that 3.3 percent is nothing, but it’s hard to see how that’s a primary driver of health-care spending, much less the growth in health-care spending.”
o Alwyn Cassil, Center for Studying Health System Change: “‘…this idea that (taking) this $12 billion that they have in profits … would fix our health-care spending problems is just a pipe dream.’”
For a printable version click here.
[i] Truffer, et al, Health Affairs, “Health Spending Projections Through 2019: The Recession’s Impact Continues”, Published online February 4, 2010.)
ICYMI: The New York Times on the Need to Bring Down Underlying Medical Costs
Posted by The Campaign on April 21, 2010 at 5:49 AM
With each passing day, there seems to be a greater and greater recognition of the fact that health care costs are growing out of control. And it is these costs that are driving the icnreases in premiums. Thus if the country is going to get premium growth under control it has to design a strategy to get these underlying costs under control.
The New York Times picks up this line of argument today in its editorial "Health Care Reform and Massachusetts." First, the NY Times recognizes that premium caps are "a short-term fix."
The editorial goes on to argue:
"Like the rest of the nation, the state needs to deal with the underlying issue: the relentlessly rising prices charged by health care providers. Those are driven in part by costly new technologies and treatments. In Massachusetts, it is exacerbated by the outsized bargaining power of prestigious teaching hospitals and regionally dominant community hospitals."
This argument follows closely to the points made by AHIP in yesterday's hearing in front of the Senate HELP Committee. The Committee held a hearing on premium increases. The New York Times covered the hearing and picks up AHIP's point of view here:
"Congress, [AHIP's President and CEO Karen Ignagni] said, has largely ignored the cause of rising premiums: the explosive growth of medical costs and the power of hospitals and other health care providers to dictate prices. Ms. Ignagni said the law imposed new requirements, taxes and fees on health plans, which could further drive up costs."
FACT CHECK: Increases in Health Premiums are Caused by Increases in Underlying Health Care Costs
Posted by Campaign on April 20, 2010 at 6:54 AM
FACT CHECK: Increases in Health Premiums are Caused by Increases in Underlying Health Care Costs
Sacramento Bee Article on Hospital Charges: The Sacramento Bee takes a look at rising hospital charges in the state of California and the effect on health premiums.
Sac Bee Hospital Charges Chart: A closer look at hospital charges across the state of California.
Fact Sheet - Premiums Driven by Benefits and Putting Administrative Costs In Perspective: A comparison of health care spending by sector to provide perspective on cost increases.
What They Are Saying - Federal Rate Review: Independent experts weigh in on the proposed creation of a federal board to review premium increases.
What They Are Saying - Costs and Premiums: Independent experts take a look at what is driving increases in health care costs and premiums.
Fact Sheet - Examples of Increasing Costs: Some examples of increases in health care services and procedures that are driving up premiums.
ICYMI: Leap of Faith and Health Care Costs
Posted by The Campaign on April 19, 2010 at 5:43 AM
Much has been written and discussed about the impact of the new reform laws on costs and in particular premiums. The NY Times continues this discussion by looking at New York state and the impact of reforms implemented several years ago on premiums, costs and coverage.
Here are some key highlights from the article:
"New York’s insurance system has been a working laboratory for the core provision of the new federal health care law — insurance even for those who are already sick and facing huge medical bills — and an expensive lesson in unplanned consequences. Premiums for individual and small group policies have risen so high that state officials and patients’ advocates say that New York’s extensive insurance safety net for people like Ms. Welles is falling apart."
"The problem stems in part from the state’s high medical costs and in part from its stringent requirements for insurance companies in the individual and small group market."
The article then lays out specifically how premiums began to increase -- a combination of adverse selection and skyrocketing medical costs. From the article "Healthy people, in effect, began to subsidize people who needed more health care. The healthier customers soon discovered that the high premiums were not worth it and dropped out of the plans. The pool of insured people shrank to the point where many of them had high health care needs. Without healthier people to spread the risk, their premiums skyrocketed, a phenomenon known in the trade as the 'adverse selection death spiral.'"
These policies have led to two very serious problems:
- "Since 2001, the number of people who bought comprehensive individual policies through HMOs in New York has plummeted to about 31,000 from about 128,000, according to the State Insurance Department."
- "At the same time, New York has the highest average annual premiums for individual policies: $6,630 for single people and $13,296 for families in mid-2009, more than double the nationwide average, according to America’s Health Insurance Plans, an industry group."
So surely policymakers at the national level must have taken some lessons from New York when writing the new reform law? Sort of. The article does mention the coverage requirement that is part of the new law but notes "...analysts say that provision could prove meaningless if the government does not vigorously enforce the penalties, as insurance companies fear, or if too many people decide it is cheaper to pay the penalty and opt out."
And for this to work, Mark Hall a professor at Wake Forest University says "You have to sort of take a leap of faith..."
Premiums, Polls and Physicians -- What is Going on in the World of Costs
Posted by The Campaign on March 30, 2010 at 12:06 PM
It has been almost a week since the health care reform legislation became law, but one thing that hasn't changed is the growing concern over the new law's impact on premiums and people's health care costs.
In fact, the Associated Press released an analysis from the RAND Corporation today which showed that premiums for young people in their 20s and early 30s will dramatically increase. From the AP story:
Under the health care overhaul, young adults who buy their own insurance will carry a heavier burden of the medical costs of older Americans - a shift expected to raise insurance premiums for young people when the plan takes full effect...premiums for young adults seeking coverage on the individual market would likely climb by 17 percent on average, or roughly $42 a month, according to an analysis of the plan conducted for The Associated Press...The higher costs will pinch many people in their 20s and early 30s who are struggling to start or advance their careers with the highest unemployment rate in 26 years.
And it's not just RAND saying this will happen, the AP also reports that other experts are arguing that premiums will increase for younger individuals as well. Jim O'Connor an actuary for independent consulting firm Milliman, Inc. estimates that young males will see increases between 10-30 percent. O'Connor says "Young males will be hit the hardest".
While premiums rise for younger folks, it must be good for other working families and employers right? Well not so quick according to AEI's John Calfee. Calfee writes in Forbes "The first thing ObamaCare will do is increase insurance costs." Calfee goes on to point out some serious concerns with the approach in the new law to control premium increases -- price controls. Calfee argues:
Insurance premium price controls cannot do much good. States that already review or control premiums show that premiums are driven by costs.
And Calfee warns this is even before 2014 which he argues is when "Pressure on premiums will become more intense." Why? Simple: a coverage requirement that is too weak. Calfee writes "In the crucial individual insurance market, the penalty for failing to purchase insurance will be only $95 or 1% of income (whichever is more) in 2014, $325 (2.0%) in 2015 and $695 (2.5%) in 2016." What will happen then -- "With healthier consumers opting out of the insurance risk pool, premiums will escalate--probably a lot." (Our emphasis.)
This leads Calfee to conclude:
There are good reasons to worry that come 2015, the nation will be immersed in a crisis of uncontrolled costs and rising insurance premiums. After all, the reform package is essentially devoid of powerful cost control.
Devoid of powerful cost control? That is strong language and can't be right can it? The New York Times has a special section today on the new health care law, and one article seems to backup Calfee's assertion. In the article by the NY Times' Gina Kolota "Law May Do Little Little to Help Curb Unnecessary Care" it is clear that the new law lacks real tools to deal with the 30 percent of health care spending that is wasteful or does nothing to improve quality. Kolota interviews doctors and economists and they seem to agree (although in fairness some say the law takes an important first step) that "the new health care legislation...is not going to make a bit of difference." Kolota continues:
To truly change the nation's chronic overuse of medical care, there will have to be a substantial change in the way patients think about health care, how medicine is practiced and how it is paid for, economists and doctors say. The legislation does little to help in those areas.
So where does the legislation come up short the most? According to the article "But the law in no way forces patients or doctors to choose one test or treatment over another or to aim for the cheapest alternative. And it does nothing to change the reimbursement system, in which doctors often make more money if they order more tests, for instance."
Even doctors are concerned about the lack of cost controls and ways to turn the system more toward value then volume. Check out this quote from the end of the story from one doctor interviewed:
"I really believe that in our heart of hearts most doctors want to curb this. We know what we are doing. And we are frustrated, too. But we can't help ourselves. There is nothing to stop us and nothing to be gained by stopping."
These stories may be why the new law has not changed people's perspective with respect to what they think the impact will be on their costs and costs to the nation, at least according to the latest Gallup poll.
According to Gallup, "One week after the passage of historic new healthcare legislation, Americans remain worried about the bill's effect on costs -- both for the nation as a whole and for them personally. A majority of Americans say healthcare costs in the U.S. and the federal budget deficit will get worse as a result of the bill. Half of Americans believe that healthcare costs for themselves and their families will get worse."
MUST READ: Time -- What Will It Cost
Posted by The Campaign on March 25, 2010 at 6:07 AM
This week, Time magazine explores the new reforms and what it will mean for America. One part of the article focuses on what the reforms will mean for costs. As many independent experts and economists have pointed out: the reforms will not do enough to lower costs.
Here are some key excerpts:
"Unlike plans to expand coverage and end discrimination against the sick, there's no proven strategy in the reform bill - or anywhere else, for that matter - guaranteed to fix the most daunting problem in U.S. health care: medical costs that are rising at twice the rate of inflation."
"...premiums will continue to rise, just with more predictability."
"Despite the demonization of the health insurance industry - some of it deserved - the business operates on a simple principle: collect enough premium dollars to cover overhead and claims plus, in the case of commercial insurers, earn a profit margin of 3% to 6%."
"Contrary to the rhetoric that has permeated the reform debate, insurance rates in most cases are rising steadily not because of price gouging but rather because underlying health care costs are increasing at an unsustainable and possibly unstoppable rate."
"Slowing the rate of increase is the only solution to a health care crisis that is still looming. On its own, the law does not necessarily do that. The reform's ultimate success will hinge on whether it can transform an industry that now rewards volume and accounts for one-sixth of the U.S. economy to one that pays for results."
Click here to read the full article.
ICYMI: What They Are Saying About Health Care Costs
Posted by The Campaign on March 24, 2010 at 11:47 AM
While the House has passed health care reform legislation, experts continue to point out concerns about what the legislation will mean for costs and premiums.
Here are what some independent experts have said:
Associated Press: “...there’s very little reason to think premiums will go down.” (Associated Press, 03/24/10)
Uwe Reinhardt, Economist, Princeton University: "What drives prices is the amount of services people are getting, plus the prices doctors and hospitals charge for those services." (Health Day/Harris Interactive, Poll Finds Americans Blame Insurers, Drug Companies for Rising Health Costs, 03/24/10)
Dan Mendelson, Avalere Health: "You'll continue to see premium rates go up because there are so many aspects of the system that are still increasing prices." (AP, Health Overhaul Promises Pain, Gain for Businesses, 03/22/10)
Drew Altman, Kaiser Family Foundation: "Premiums will continue to go up." (The Washington Post, Ezra Klein, An interview with Kaiser's Drew Altman, 03/22/10)
Uwe Reinhardt, Economist, Princeton University: "This thing will not get us off the hook cost-wise." (The Washington Post, Ezra Klein interview with Uwe Reinhardt, 03/22/10)
What They Are Saying: Costs and Premiums
Posted by The Campaign on February 24, 2010 at 8:00 AM
What They Are Saying About Costs and Premiums
- Alwyn Cassil, Center for Studying Health System Change: “The biggest factor driving up premiums, she said, is the fast-increasing amount that is spent on medical care. And that is driven by how much doctors are paid and how many services they provide…The price hikes by doctors, hospitals and other providers hasn’t gotten enough attention, she said.” (AOLNews, Who’s the Bad Guy in Insurance Premium Hikes?, 02/21/10)
- Paul Ginsburg, Center for Studying Health System Change: “And ‘the elephant in the room that no one has focused on is providers’ power to get higher rates from insurers.’” (USA Today, Impact of bipartisan summit to be felt beyond health care, 02/24/10)
- Uwe Reinhardt, Economist, Princeton University: “‘Everyone is beating up on the insurance companies, but you may be shooting at the wrong target…’” (AOLNews, Who’s the Bad Guy in Insurance Premium Hikes?, 02/21/10)
- Alwyn Cassil, Center for Studying Health System Change: “‘…this idea that (taking) this $12billion that they have in profits … would fix our health-care spending problems is just a pipe dream.’” (Louisville Courier-Journal, Health insurers defend profits, 02/21/10)
- The Washington Post: “The president also would give the government power to block increases in health-care premiums. Given public concerns about a federal takeover of the health-care system, letting the government essentially dictate premiums hardly seems like a step in the right direction. More than half the states already require their insurance commissioners to approve rate increases in the individual or small-group markets; the House- and Senate-passed bills provide authority to review increases for insurers participating in the newly created exchanges. The White House argues that this power will help shield consumers in the four years before the exchanges are up and running, but its recent use of the insurance industry as a political scapegoat does not bode well for its responsible use of such authority.” (The Washington Post, Editorial: On health care, Mr. Obama lets the next president do the hard stuff, 02/23/10)
- Los Angeles Times: “The unfortunate reality in healthcare reform is that there is no quick fix to reducing premiums or even bringing their growth into line with inflation. The ever-increasing cost of insurance reflects the incessant growth in healthcare spending. And the solution is to reduce the supply of money for healthcare, lower the demand for medical services, or do both.” (Los Angeles Times, Editorial: Back to the drawing board, 02/08/10)
- Kim Holland, Oklahoma Insurance Commissioner: “Holland noted that state regulators are responsible for assuring the solvency of plans, not just reviewing rates. One question about the Feinstein proposal is the consequences that could occur from having the federal government only focusing on rates without specifically having responsibility over solvency. She suggested that federal denial of rate increases could create solvency concerns…Holland emphasized that rising medical costs are the underlying driver of rising premiums and that policymakers need to focus on those rising costs.” (CQ, Insurers, State Regulators Fault Federal Review of Rate Hikes, 02/22/10)
- Sandy Praeger, Kansas Insurance Commissioner: “‘If you want to keep costs under control, it’s not about managing health care premiums…it’s about managing the underlying health care costs.’” (Kaiser Health News, State Regulators Criticize Obama Plan To Create Federal Authority Over Health Insurance Rates, 02/22/10)
- Ralph Neas, National Coalition on Health Care: “‘None of the proposals yet has done enough on cost containment.’” (USA Today, Impact of bipartisan summit to be felt beyond health care, 02/24/10)
ICYMI: AHIP Statement on Premium Increases
Posted by Campaign on February 18, 2010 at 8:08 AM
AHIP Statement on Premium Increases
Ignagni: “It’s time to stop the politics of vilification.”
Washington, D.C. – America’s Health Insurance Plans (AHIP) President and CEO Karen Ignagni today released the following statement regarding premium increases:
“It’s time to stop the politics of vilification and focus on what Americans need most: real health care reform that addresses the serious and urgent problems facing our nation.
“Increases in the cost of coverage in the individual market shine a spotlight on the urgent need to reduce the growth of underlying medical costs and to bring everyone into the system. If reform doesn’t address these pieces, it will not solve the serious problems that individuals, families, and employers face. That is why health plans have proposed fundamental reform of health insurance markets and a long-term strategy to reduce rising health care costs.
“Health insurance premiums are increasing in the individual market because of soaring medical costs and because younger and healthier people are dropping their coverage due to the economy. In 2009, according to a report from the Department of Health and Human Services’ Centers for Medicare and Medicaid Services released on January 5th, rising costs for hospitals, physicians, and prescription drugs led to the largest growth in health care spending as a share of GDP since the government started keeping track 50 years ago. At the same time, the portion of premiums that went towards health plans’ administrative costs and profits declined for the second year in a row.”
Facts about rising health insurance premiums
- In every state, health plans have to provide actuarial justification for any premium increases.
- Federal government data confirms that rising health care costs are driven by increased spending on hospital care, physician services, and prescription drugs.
- AHIP recently sent a letter to Capitol Hill to highlight the key factors contributing to increases in health insurance premiums. These factors include:
o sharp increases in provider rates;
o increased cost-shifting as providers seek to offset the costs of treating more Medicaid patients;
o an increase in uncompensated care costs;
o consolidation among hospitals and other health care providers;
o a wide range of new state laws, including benefit mandates, regulations, and premium taxes; and
o economic factors that have caused some people to drop coverage resulting in a risk pool that is more heavily weighted with older, less healthy persons.
- According to National Health Expenditure Accounts, health plan administrative costs have fallen over the past two years from 12.8% in 2006 to 12.5% in 2007 to 11.7% in 2008. (See Table 12)
Facts about health plan profits
- Fortune 500 puts the health plan industry profits at 2.2%, 35th on its list of profits by industry sector. This is below other sectors of the health care industry.
- According to Yahoo! Finance’s latest analysis of quarterly financial data, the net profit margin for the entire health care sector is 11%. Using the same index, health plans have a 3.4% net profit margin.
