Health Premiums Rise and Insurers Drop Guarantees Amidst Regulatory Uncertainty



What happens to a highly regulated industry in which government actively changes the rules of the game on an ongoing basis? Well, matters get a bit uncertain, to say the least. And with the federal government "improving" America's health care with a massive state intervention, details to be determined later, health insurance companies are betting that the only thing they can know for certain is that costs are going up. That means insurance companies are shortening or dropping rate guarantees so that they can adjust premiums as needed — and not downward, you can be sure.

Over at Forbes, Merrill Matthews of the Institute for Policy Innovation writes:

Now comes the most ominous sign yet health insurance premiums are going way up: Most health insurers in the individual market have stopped guaranteeing a person's premiums for a year.  And as one commentator quipped: they aren't doing it because they expect to be lowering people's premiums.

Traditionally in the individual market, where people buy their own (i.e., non-group) health coverage, applicants sign a contract and the insurance company guarantees that premium for a year.  I'm told that about 12 percent of individual applicants would write a check for the year's premium, rather than being billed monthly.

No more.  Health insurers started sending out notices in January informing insurance brokers and agents that the companies will no longer guarantee that premium rate.  From now on it's month to month.

Matthews cites an Aetna notice to brokers, discontinuing 12-month guarantees as of January 15, 2013. That notice has generated quite a bit of buzz, but it wasn't the only one. Blue Shield of California dumped its rate guarantee two years ago, citing regulatory uncertainty as a reason. At the time, insurance broker Dean Forman told the Sacramento Business Journal:

"I don't know of any other business in the world that's mandated by the government to give more and not charge more. If you read between the lines, I believe (insurers) are very concerned about these mandates and the viability of the whole individual market, going forward."

Anthem Blue Cross of California reduced its rate guarantee from one year to six months in 2011. In his Forbes piece, IPI's Matthews continues:

As one health insurance broker told me, "Any health insurance actuary would be fired for trying to set a premium for a whole year because no one knows how much it's going to cost."

Why the uncertainty?  Because Democrats crafting ObamaCare ignored virtually every actuarial principle.  ObamaCare requires insurers to accept anyone who applies; they can't charge more for major medical conditions; and they require insurance to cover lots of things that many people wouldn't choose for themselves.

Is there really regulatory uncertainty? Well, this past September, the National Retail Federation begged Congress for some idea of what to expect from the Affordable Care Act. On the NRF's blog, Neil Trautwein, Vice President of Health Care, wrote:

My testimony centered on retailers' desire to receive more definitive guidance – from the administration and its agencies – in advance of the crucial transition year of 2014. Unless temporary guidance hardened into notice-and-comment finality by the first quarter of 2013, I warned, employers and retailers would be hard pressed to make the transition to the new markets in 2014.

Serious attrition from the number of employer-sponsored plans is a real and distinct possibility, and one that should not be underestimated or overlooked. In this vacuum of regulatory uncertainty and unease, employers may have to restrict, reduce or even eliminate their health care plans (a no-win situation for employers and employees alike). Workforce size – in a job-hungry economy – may also suffer as jobs become more expensive as the costs of coverage increases.

Rate guarantees aside, health insurance premiums are going up, and quickly. In September, ABC News's Jake Tapper noted that two separate studies had found premiums rising at an accelerating pace.

During Obama's term, between 2009 to 2012, premiums have climbed $2,370 for the average family with an employer-provided plan – a rate faster than the during the previous four years under President George W. Bush, according to Kaiser.

Tapper also quoted Obama administration officials backtracking from an earlier claim that they would lower premiums and instead saying that had promised only slower growth in costs.

Note that rates were going up before Obama, too. The current president didn't invent rising healthcare costs. But it's clear that his signature legislation has both insurance companies and their customers confused over everything except the certainty of continuously rising costs and the uncertainty of just how the law will shake out.

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  1. Maybe they should have read it and found out what’s in it, before they supported it.

    Kinda like my biz: The American Hospital Association was a supporter (and I suppose still is), but I haven’t talked to a hospital yet that isn’t taking it up the ass from ObamaCare.

  2. At least my current one-year policy with Aetna lasts another nine months. This is going to suck.

  3. Moar free shit till it hurts

  4. “We only had everyone’s best interests at heart! It’s not our fault that those greedy [fill in the blank]s have chosen to put profits ahead of people!”

  5. Fuck you Obamacare and the 70 years of legislative stupidity the preceded it.

    In 2 1/2 years my premium has increased almost 50%. And it’s not like I’m using it a lot or developed any new conditions.

    Is there any possible way the current trajectory of this mess gets turned around? Or at least slowed down?

    1. No?

      Ha! See the joke there? I used a question mark when it should have been a period after “No”.

      We are in for some tough shit unless there is a miracle on the near horizon.

    2. I don’t see how, absent radical reform. And Congress refuses to deal with the doc fix, which is just one aspect of this.

      community rating, guarantee issue and an aging population and an unwillingness to confront the core problems in health care.

  6. You see, I told you dumb teabaggers we needed single payer!

  7. I’m just awaiting the absolute train wreck at the end of this year when it turns out the exchanges are shit, and millions of people can’t buy insurance. They’re only way out will be a massive waiver with egg all of Obama’s face.

    1. Alas, I believe we will be the ones with stuff all over our faces and it won’t be eggs. The man is beyond teflon.

    2. Perhaps I’m too cynical, but I believe this has been the desired goal all along. People won’t just go for single payer healthcare all at once. You have to distort the market so much that it becomes too expensive for most people.

      Sadly, given the timing of provisions coming online before the nearest elections, I can think of no way to prevent it. The games not over, but the checkmate is assured.

  8. Switching jobs from big bidness (30,000ish employees) to a small company (300 employees) more than doubled the family premiums for coverage with much higher copays. Pity the old job sucked.

    1. Just think, if we taxed the rich and had universal health care, you wouldn’t be paying any premiums.

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