Healthcare demand down, yet premiums still climbing

Does this sound right to you? The feds are reporting medical costs are growing at a slower rate than projected cost figures, which insurance companies use to set their rates. But the companies won’t scale back rate hikes.
The Department of Health and Human Services (HHS) just issued a statement, saying health insurance companies are reporting some of their highest profits in years.
One reason for these profits: Medical costs are growing slower than what insurance companies projected when they set their 2011 rates last year, according to the HHS.
The New York Times recently reported that UnitedHealth Group, a large commercial insurer, told analysts that insured hospital stays decreased in some instances last year. The report also claims that Cigna, another insurer, has talked about lower levels of medical care.
What’s causing the decline in use? Financial struggles are causing Americans to pinch pennies.
Many are postponing or skipping care to save as much as they can.
No breaks from insurers
Despite the fact big insurance companies don’t appear to be shelling out as much in medical claims as projected, they aren’t cutting plan participants any breaks in premiums.
In fact, some large insurers are pushing for increases in the 20%-25% range.
Why aren’t rate increases leveling off?
Here are the justifications those in the industry are offering up:

  • Insurers expect demand for healthcare to go back up later this year.
  • They are raising premiums to cover the cost of healthcare reform’s early mandates — like insuring adult children up to age 26.
  • They are implementing double-digit increases before it becomes harder to do so under the HHS’ new rules governing rate increases that kick in this September.
  • They are gearing up to deal with the reform law’s more costly mandates that start going into effect in 2014 — like having to provide coverage to everyone, regardless of pre-existing conditions.

Forgive our cynicism, but we can’t help thinking they left one prime motivator off this list: profits.
Why do you think insurers haven’t taken their foot off the gas when it comes to premium increases? Share your opinions in the Reply box below.