This week, when I read the headlines “Blue Cross proposes premium increases,” I cringed.
Health care premiums are a significant burden on many American families, averaging about $1,000 a month, not counting thousands of dollars people pay in deductibles, copayments, medical supplies and medications.
So I did some research.
Healthcare premiums for private health plans are of two types. One is employer-sponsored health insurance, which 45 percent of Tennesseans receive. Over the past few years, the premiums of these plans for individual coverage have not increased and for family coverage have slowed to a 3-percent annual rise. Blue Cross Blue Shield’s proposed premium increase does not impact these Tennesseans.
The second type of private health insurance is for plans on the newly-formed health exchanges under the Affordable Care Act , or Obamacare. An exchange is essentially a one-stop marketplace where consumers can decide among categories of health insurance called platinum, gold, silver and bronze, based on benefit categories. Insurance companies such as BCBS or Cigna offer plans at varying costs.
Twelve million Americans have purchased plans on the exchanges (healthcare.gov). Of these 231,000 are Tennesseans and two-thirds of them have the Blue Cross Blue Shield health plan. The rate increase would affect this sizable group. Why is there such a large premium hike–nearly 36 percent –among the Blue Cross Blue Shield plans? After speaking with health economists, I learned the answer relates to uncertainty.
In previous years when setting rates, Blue Cross likely underestimated the number of enrollees and their level of illness, as well as their high level of health services utilization when they become newly insured. All this, combined with lapsing of federal government protections of “risk adjustment” from financial loss for insurance companies, has likely made many insurers gunshy, leading them to propose a hefty hike in premiums.
Nevertheless, the hikes are not a done deal. Insurers have to go through a number of checks and balances, many of which were put in place by the Affordable Care Act, also called ACA. First, state regulators must approve the rate hike as being justified, after reviewing insurance company data. Second, the ACA requires insurance companies to spend a minimum of 80 percent of the premiums on medical care or else give their customers rebates. In the first year of the ACA insurers rebated $1.1 billion and $2.1 billion in the second year.
Lastly, a good way to control premium rates is through market competition. If Blue Cross Blue Shield raises its rates too high, other insurers will jump in. UnitedHealthcare has already initiated a process to provide an insurance product on the Tennessee exchange.
In Tennessee, Blue Cross Blue Shield’s proposed 36-percent increase left many wondering if their subsidies will also increase. About 80 percent of those on the exchanges receive subsidies to help make health insurance affordable. The answer is a “likely yes.” That’s because the subsidy depends on the cost of the premium as a percent of an individual’s income and is benchmarked to the premiums for the second lowest silver plan.
While the exchanges may seem chaotic and frustrating, for many patients, the ACA is life saving. So with this proposed premium hike, I wondered about the future of the ACA. The exchanges are not on the verge of collapsing, but I believe they are going through a market correction.
The exchanges are an innovative, market-driven strategy, which foster competition, choice, cost-savings and quality among insurers. They are an example of managed competition as its best, an idea originally proposed by a conservative think tank, the Heritage Foundation.
So the most important question we must ask is, who ultimately controls the rise and fall in our premium rates? While doctors, hospitals and insurance companies play a large role, we consumers can collectively help to lower our health premiums by changing many of our behaviors. For example, avoiding unnecessary ER visits can save $38 billion. Smoking costs the nation nearly $170 billion dollars in direct medical care. Roughly 11 percent of our aggregated healthcare expenditure is associated with inadequate exercise, and healthier diets may prevent $71 billion dollars in medical costs associated with diseases like diabetes.
All of this trickles down to affect our healthcare premiums.
Finally, another way to lower our premiums is to convince more people, our friends and neighbors, to sign up for health insurance, because on average a family or their employer pays $1,017 extra in premiums for those who are uninsured. It’s time we all do our part.
Source : Commercial Appeal