Insurance premiums

Rate increases incongruous with costs

For too many years, the rising cost of health care has been ringing alarm bells for individuals, families, doctors, and governments at the local, state and national levels. For insurance companies, though, that trend has been less alarming than lucrative. Though the Affordable Care Act contains provisions designed to curb profits to insurers, rates are by no means going down because of the law. In some cases, they are soaring far beyond the pace of costs.

The New York Times reported Sunday that insurers are raising rates by around 20 percent in some areas, even though health care costs are anticipated to go up only 7.5 percent in 2013. Those most likely to be affected by the jump in premiums are small businesses and individuals who do not participate in group plans. Also, the rate increases vary by state, presumably linked to a corresponding variability in health-care costs.

What is missing from the equation is the disproportionate penalty individuals and small businesses will have to pay to keep themselves and their employees covered while insurance providers are making certain that they do not see any setbacks to their bottom lines. While provisions in the Affordable Care Act require that insurers gain government approval for rate increases, and that those increases not be inflated to secure profits beyond a certain point, there are other mechanisms at work that tilt the scales in insurers’ and some care providers’ favor. In Iowa, for instance, hospitals have merged to form a strong force capable of driving costs higher. Insurers follow suit by passing those increases on to consumers – with a cushion.

It seems almost predatory to charge handsomely those most affected by rate increases – individuals who pay a higher premium for not being able to participate in a group plan, or small businesses that struggle to provide coverage to their employees – while levying smaller increases on larger group plan premiums.

Doing so can price the most vulnerable out of the insurance market and undermine the intent of the Affordable Care Act. And if the increases are predicated on protecting insurers’ bottom lines while not considering those of their customers, it is difficult to see the justification, particularly when the increases are not made consistently.

The Affordable Care Act does much good for health care in the United States, namely by expanding the pool of insured, but controlling costs directly and effectively is not its strongest prong.

Presumably, once most Americans are insured, a provision that goes into effect in 2014, there will be a corresponding decrease in the cost of coverage as risk is spread across a broader population. In the meantime, though, insurers are hedging their bets on the backs of those they purport to serve. It is not illegal, though it is hardly upstanding behavior.