Health Insurance Premiums on the Rise
Benjamin Franklin’s famous quote "In this world, nothing is certain but death and taxes” may just need to be expanded for life in the 21st Century. It now seems that we can add rising health insurance premiums to that list of certainties. And in 2011, not only did they go up, but the rise was dramatic.
According to a new study from the Kaiser Family Foundation, the average annual premium for family health insurance coverage in the United States was up by nine percent over 2010, reaching a total of $15,073.1 This increase is far beyond the growth of employee wages, ensuring that any amount that is not being absorbed by employers will be felt directly by workers’ wallets.
Several of the major insurance companies are requesting double-digit rate hikes for small-group and individual plans. With the economy still struggling and unemployment rates stagnant around nine percent, insurance companies are truly adding insult to injury. Smaller businesses are reluctant to hire new workers because of skyrocketing insurance costs, doing further damage to the unemployment rate and potential creation of jobs. And those people forced to pay for insurance premiums out-of-pocket often can no longer do so. Coverage for a family is twice as expensive as it was in 2001.
Of course, the insurance companies defend their enormous increases by claiming it’s not their fault. Yes, in some cases hospital, physician, and pharmacy costs have all risen, but this is the third year in a row that the major health insurers have had record profits. They have recently been bolstered even more by the fact that many people have cut back on their own doctor visits to avoid expensive co-pays and deductibles as part of their own belt-tightening.
According to the Kaiser report, a portion of the increases can be attributed to the new federal healthcare legislation that will be enacted in 2012 as a number of politicians claim -- but, in truth, only a small part. Their estimate is that perhaps one to two percent of the increase is due to expanded coverage for young adult children and preventive services that have already taken effect. The remainder of the more than 10 percent bump could be the insurance companies’ way of preemptively getting payment for some of the future coverage that was legislated.
But there are other theories as to why healthcare is so expensive. East Coast Health Insurance, a national health insurance broker, offers five reasons.2
- 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. You can thank trial lawyers for that cost.
- Reason two is that about one third of U.S. health care spending -- versus about 16 percent in Canada -- is for administrative costs. And yes, American doctors and insurance executives are very well paid.
- 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 than men. But this is only true during women’s reproductive years, and 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.” It’s hard to see why insurance companies wouldn’t underwrite more smoking cessation, exercise, and nutrition programs given that they could still collect premiums while paying out less to cover medical procedures, but they don’t.
- The fifth reason is, "Your doctor is paid for how much he does for you…not for how well he cares for you.” In other words, in the American health care system, outcomes matter less to the bottom line than how much treatment you receive. Your doctor makes more money if you receive a whole lot of treatment for your heart problems and then die, as opposed to if you have just one visit where you get some natural health instruction that prevents you from getting the disease in the first place.
And Jon Barron’s own reason six is that insurance companies charge more because they can. Using public anger, fear, and the uncertainty created by the new health care bill as cover, they are simply trying to slip in price hikes.
As Jon Barron always says: the only way to save health care and reduce its costs is if people start taking care of themselves and stop using the system -- except when absolutely essential -- in the first place. To learn how, check out the Baseline of Health Program.
1 undefined. "Employer Health Benefits 2011 Annual Survey." The Henry J. Kaiser Family Foundation. 27 September 2011. The Henry J. Kaiser Family Foundation. 19 October 2011. <http://ehbs.kff.org/>.
2 undefined. "Why is Health Insurance So Expensive?." East Coast Health Insurance. 2010. East Coast Health Insurance. 19 October 2011. <http://echealthinsurance.com/health101/health-insurance-rate-increases/why-is-health-insurance-so-expensive/>.