Despite "Reform", Health Care Prices Spike

Posted by - Wednesday, September 28th, 2011

Health care costs are going through the roof while coverage is dwindling. In consequence, 49.9 million Americans currently do not have health insurance. They just can't afford it.

In 2011, family health premiums spiked by 9 percent, according to the Kaiser Family Foundation. Take a look at the chart...it shows the sharpest, quickest increase of health insurance inflation since 2005.

health care
Image courtesey of Wall Street Pit.

Here's what the stats show:

The two provisions in the Affordable Care Act likely to have the greatest effect on the premiums for employer-sponsored health coverage in 2011 are allowing children up to age 26 to remain on their parents’ plans and requiring plans that are not grandfathered to provide preventive services with no patient cost-sharing. Our analysis, based in part on estimates provided by federal agencies when regulations implementing these provisions were issued, suggests that these provisions are responsible for 1-2 percentage points of the 9% increase in family premiums in 2011. (emphasis added)

Stripping out those two specific ACA effects, premiums would still have increased by 7-8% according to Kaiser’s estimates.

But that isn’t the end of the story. A remaining question is whether other aspects of the ACA might also have contributed to the premium increase. Kaiser argues, plausibly, that the two factors it considered were the most direct link between the ACA and 2011 premiums. But perhaps there were indirect links as well?

One of the biggest problems is that a lot of assumptions were made in 2010 regarding health insurance premiums.

Back then, insurance companies assumed medical costs would be much higher than they turned out to be. However, the Bureau of Labor Statistics found just the opposite: health care services were at the lowest rates they'd been at in over a decade in the first half of 2011.

Also, several insurers thought the Affordable Care Act would end up raising their costs. But, it didn't. Nonetheless, insurance companies still increased their premium costs – earning significant profits along the way. 

Wall Street analysts’ review of results from the first quarter of 2011 found that 13 of the top 14 health insurers exceeded their earnings expectations, with profits that were over 45 percent higher than estimated.

Employers around the nation are exclaiming that the rates of increase are “phenomenal”.

In one case, a florist in Newmarket, N.H. with 11 employees, reported that the monthly premium for single employees surged by 40 percent! The cost went from $560 per person each month to a shocking $789 per month!

Regulators and economists assert that the costs are so high simply because health care itself is so expensive.

Still, the recent spike in health care costs have a lot of angry employees and frustrated employers. Add shrinking coverage, rising deductibles, and more limited options (i.e. hospitals to choose from) and the debate has become a hot mess without a simple solution.

Obama's health care "reform" hardly seems like a success when you look at it that way...

One can only hope that the current woes of the people will be addressed when planning for the 2012 premiums.

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