Everyone who has waded through all the possible health insurance policies available on the market knows what a long, often stressful process it is. Once a consumer has settled on a health insurance policy that is affordable and provides the benefits he or she needs, it would be comforting to know that the amount quoted will not be subject to a yearly rate increase.
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Unfortunately, these past decades have shown us that this is not the case. We all expect that inevitably, our insurance rates will go up, and we fear that with a monthly budget often getting tighter, the peace of mind of health insurance coverage will become unattainable. Why is that?
Why have insurance rates increased in the past?
From the National Health Expenditure data, we find that health insurance premiumshave increased at a rate of 9.9% since 1970. These increases were made with little oversight from governmental or consumer agencies. Insurance rates were going up because the insurance companies were subject to the ever-rising costs of providing health coverage.
The following forces have been mentioned as the causes of higher premiums:
- Medical procedures, which are more and more sophisticated and expensive
- Administrative costs that keeps getting more expensive partly because of the large numbers of carriers
- Marketing costs for new drugs
- More people living longer and requiring more visits to the doctors and more hospital care
- Slowly declining number of younger workers having health insurance policies
- Doctors’ salaries, which are high, compared to many other countries
- Insurance companies’ desire to keep ahead of the costs charged by hospitals for their services
In 2009, a Kaiser Family Foundationsurvey found that an average family health policy cost more than $13,000 a year for an employee and its employer. It represented a 50% increase in 10 years. It is clear that, if we continued on this road, the average American family would find it extremely difficult, if not impossible, to afford health care.
What rate increases can we anticipate in 2012?
On November 17, 2012, the Washington Post reported that, for employer-sponsored policies, premiums are continuing to rise faster than most workers’ income. These increases vary substantially from one state to another and do not necessarily depend on the average income level of its inhabitants. For example, the District of Columbia had the highest annual premiums in 2010 and the state of Alabama had one of the lowest, while Maryland and Virginia were in the middle range.
In the state of New York, insurers asked for a 12.7% average increase for contracts signed after January 1, 2012 but the Department of Financial Services allowed only an 8.2 % increase. This will create more than $400 million in savings for the policyholders for the 2012 year, according to New York state projections.
In Massachusetts, premiums for individuals and small businesses will go up 4.8%, effective January 2012. Price inflation was the reason why the increase was allowed.
Many companies have plans to increase their premiums between 1% and 9% in anticipation of the increased costs that result from the added benefits of the new health care law passed by Congress.
These new benefits include:
- Until the age of 26, children can stay on their parents’ health insurance policy
- No co-payments for preventive care
- No denying of coverage for children with previously existing conditions
- No more coverage caps
On the other hand, in February 2011 a report by Weiss Ratings showed that the U.S. health insurance industry was going to see a decline in medical expenses for the first time in a decade. In the first six months of 2010, there was a 1.6% decline in costs charged for medical care. Because of this trend, we should expect to have a lowering of our insurance rates.
What will be the effect of the Affordable Care Act on future rates?
In an attempt to give more information to all consumers, the Affordable Care Act requires that insurance carriers make a case for any new increase in their services.
Starting in 2011, companies who wish to increase their rates by more than 10% have to provide proof that such increases are justified.
The affordable Care Act gave $46 million to 45 states and the District of Columbia to assist in providing oversight of proposed rate increases.
States will be able to act against companies who make unreasonable increase requests.
What can each of us do?
While health insurance rates are mostly dependent on factors beyond any individual’s ability to control, some contributions can be made to keep health care within the limits of affordability for everyone.
When we are sick, we all tend to want the:
- Best available new procedures
- Latest drugs
- Most sophisticated hospitals
- Nearest health facilities
In this way, we inadvertently influence the cost of care. When a surgical procedure is available and paid for by our insurance policy, we are inclined to demand it, regardless of its real benefit. Could we be a little more careful about how we use our insurance benefits?
The most important role each of us can play is in taking these few steps to live a healthier life:
- Make good nutrition a daily part of our life and our children’s lives
- Make exercise part of a daily routine
- Make sure our children get the appropriate vaccinations on a timely basis
- Get a doctor’s appointment for regular yearly check up
Now is the time to check the health insurance rates available in your area by entering your zip code!