Anthem’s getting a lot of grief for planned increases on individual premiums in California of up to 39 percent. No doubt they deserve some blame. And yet those who decry the move as price gouging and point to Anthem’s multi-billion annual profit don’t have the whole picture either.
Anthem and other commercial carriers are seeing younger, healthier people –even those with moderate to higher incomes– take a pass on health insurance. With the monthly cost of insurance approaching the cost of rent or food, it’s not a completely irrational move. Twenty and thirty-something’s figure they won’t get sick or injured and even if they do they’ll blow off their bills completely or have someone like Medical Bill Helper negotiate bills on their behalf.
Without the younger, healthier folks in the risk pool, the average medical cost per member rises. As it rises, health plans raise premiums and more people drop out. In the end only the older, sicker folks remain. Sure, California or the US could regulate premiums more, but it won’t solve the problem of high costs per member.
The stalled health care legislation in Congress is based on the notion that getting nearly everyone into the insurance system will help keep costs under control. Once everyone is in, then banning medical underwriting (e.g., discriminating based on prior conditions) and establishing price controls are more realistic.
Even in such a system individuals and small businesses may get squeezed. Consider the situation in my home state of Massachusetts. We have health care insurance reform that largely parallels the pending/dying federal reform bills. There is pressure on health plans to offer affordable plans to those who use the “Connector” and to limit rate increases. Meanwhile large employers have negotiating power to keep rates down.
In that scenario, small employers (like my firm) get whacked with annual increases of 25 percent or more even when the subsidized plans are going up at half that amount or less.
We’ll have to look closely at how medical care is delivered and paid for in order to fully address the problem of high and rising insurance premiums.February 10, 2010