As if you needed yet another reason to make sure that you keep yourself in optimal health, costs for health insurance rose significantly in late March, just before the federal government passed the healthcare reform legislation.. According to a Kaiser Family Foundation (KFF) study reported in Reuters, costs for people 64 and younger buying their own health insurance increased by an average of 20 percent. The study said that about 14 million adults buy their own insurance and the price hikes affected about 75 percent of them.
According to Kaiser Family Foundation CEO, Drew Altman, “With people in the individual market being hit with average increases of 20 percent, the survey shows that the steep increases we have been reading about over the last several months are not just extreme cases.” Yet there have been extreme cases too. For example, California insurance provider Anthem Blue Cross announced a 39% price hike for individuals purchasing their own health insurance.
In response, U.S. Health and Human Services Secretary Kathleen Sebelius expressed her deep disturbance in a letter to Anthem President, Anthony Margolin, saying, “These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy. Your company’s strong financial position makes these rate increases even more difficult to understand.” Around the same time, Anthem’s parent company, WellPoint Inc. announced that its profits for the last quarter of 2009 had increased eight-fold. Anthem subsequently withdrew the request for the rate hike.
The Kaiser Family Foundation findings come from an online survey completed by around 1,040 working age adults in late March and early April of 2010 — prior to President Obama’s signing of healthcare reform. The findings helped to clarify the challenges that people have faced and are likely to continue to face until 2014, when many provisions of the healthcare law go into effect. Most of those subscribers who have been buying their own health insurance having been coping with rising prices by biting the bullet and paying more with each price hike. But at least 16 percent of those affected by price hikes opt to change plans to something cheaper, which typically means a plan with far less coverage. This does not mean that they end up paying less. On the contrary, those who downscaled to a less extensive plan still ended up paying an average of 13 percent more, for less coverage.
The survey results indicated that just about half of individuals purchasing non-group insurance were unable to find a plan that truly met their needs. And among those with pre-existing conditions, 81 percent feared that insurance companies would soon price them out of being able to afford health care coverage.
Why is healthcare so expensive? East Coast Health Insurance, a national health insurance broker, lists five reasons.
- First, doctors are “freaked out about getting sued.” As a result, they order many unnecessary tests, procedures, and therapies so they’re covered in case of a legal dispute. Of course, health care companies pass those costs onto their customers.
- Reason two is that about one third of U.S. health care spending — versus about 16 percent in Canada — is for administrative costs. These costs would be less of a factor, according to East Coast Health Insurance, if health care were “socialized.” (That, of course, is a loaded word in America.)
- The third reason is that females pay much more than males. Insurers say this is because women are more likely to go to their doctors then men. But this is only true during women’s reproductive years, and anyway, men more than catch up after the age of 50.
- Reason four is that, despite all obvious logic, “your insurer would rather pay to treat a disease than to prevent one.” Of course, pharmaceutical companies exist to develop drugs to treat diseases. Prevention is not part of their profit strategy. But, then, pharmaceutical companies and insurance companies have different financial imperatives. According to East Coast Health Insurance, $10 a year per person spent on smoking cessation, exercise, and nutrition programs could save more than $16 billion in health care costs five years down the pike. It’s hard to see why insurance companies wouldn’t underwrite more such programs given that they could still collect premiums while paying out less to cover medical procedures, but they don’t.
- Reason five is, “Your doctor is paid for how much he does for you…not for how well he cares for you.” In other words, outcomes matter less to the bottom line than how much treatment you receive. The doctor makes more money if you receive a whole lot of treatment for your heart problems and then die, compared to if you have just one visit where you get some instruction on natural health that prevents the disease in the first place or helps you heal naturally. In a perfect world, doctors might be paid on the positive results they achieve, rather than on the number of procedures they implement.
- And reason six, which I’m adding to the list, is that insurance companies charge more because they can. Using public anger, fear, and the uncertainty created by the new healthcare bill as cover, they seem to be trying to slip in price hikes while no one is looking. Think back on Anthem’s 39% price increase even as profits had increased eightfold.
The bottom line is that no one had to consult an oracle to predict that health care premiums would rise — first for individuals, but group plans are not far behind. Between now and 2014, these costs will probably continue to rise. No one really knows what the implementation of the provisions of the health care reform law in 2014 will bring. But again, the demographics of aging and increasing disease would seem to make an endless cascade of price increases inevitable.
In other words, as always, it pays to do what it takes to follow the Baseline of Health Program. Ultimately, if you want to survive the eve-increasing costs of healthcare, you have to take care of yourself and rely on medical care less.