Health reform equals higher health insurance premiums

Maryalene LaPonsie | January 5, 2011

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Take a quick glance at the news these days, and you'll find the headlines peppered with reports of higher health insurance premiums. Almost as soon as the Patient Protection and Affordable Care Act (PPACA) was passed in March 2010, critics argued that many of the health reform provisions would result in sky-high health insurance premiums. Supporters, along with the White House, were equally as convinced that the reforms would ultimately reduce the health insurance rate for millions of policyholders.

Short term health insurance rate increases

At least for the immediate future, it appears that the critics may have been more right than wrong. Health insurance premiums have undoubtedly increased across the nation. However, how much of that is due to health reform may not be quite so clear.

Double-digit premium increases were the norm in 2010 with Anthem Blue Cross winning the prize for dropping the most jaws with its proposed 39% rate hike for those enrolled in its individual health plans. The rate increase request was later withdrawn and replaced with one that averaged 14% instead.

As insurers roll out their 2011 health insurance rates, many companies point to health reform as the reason for increases. When blaming the PPACA, they cite mandates such as:

  • Mandatory coverage of dependents up to age 26 on group insurance plans
  • Free preventive care without co-payments and deductibles
  • Prohibition of exclusion periods for children with pre-existing conditions

Champions of health reform cry foul and assert that health insurance companies are using the new mandates as an excuse to jack up rates and profits. With Aetna posting a 53% increase in third quarter profits last year, reform supporters have no shortage of ammunition when they say health insurance companies aren't hurting for money right now.

Big Brother is watching

Understandably, the federal government is unhappy with attempts to paint health reform as a negative. To combat the rash of increasing health insurance rate reports, the Department of Health and Human Services (HHS) announced that it will require insurers to justify any increase of 10% or more in 2011.

While it might make for good press, it might also simply be an exercise in expanding bureaucracy. Consulting firm Aon Hewitt calculates that HMO premiums will rise by more than 10% in four out of five national regions. That means a lot of paperwork for state and federal regulators to review, and there doesn't seem to be any clear mechanism by which HHS could reject a rate deemed unreasonable. Without any teeth, the new rule could just be another example of federal overreach.

Regardless of whether new mandates are actually causing health insurance rate increases or only a convenient scapegoat, the reality is, one way or another, health reform is putting a dent in wallets across the nation.

Tags : health reform, health insurance rate, health insurance premiums

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