Higher Insurance Premiums Exasperate Health Insurance Consumers

The rising cost of family health insurance has dramatically outpaced that of family incomes, as you can see in this historical graph. The President really has his work cut out for him lately selling health care reform; it is hard for the average American to get excited about the new law when those who buy their own coverage are facing a 20 percent increase in their health insurance premiums.  Those covered by their employers (in the “group market”) have seen their rates rise as well.  If we have finally started to fix this mess why is health care getting more expensive not less?

So Why are Health Insurance Costs Going Up?

The answer is simple and complex at the same time.  At the most basic level, health insurance premiums are going up because the cost of health care is rising.  And during this recession people who don’t need a lot of care (the “young and healthies”) are opting to forego coverage, making the current pool of insured in the individual market older and sicker on average.  A slightly more sinister explanation is that insurance companies may be playing off consumer fears of health care reform, and trying to make strong profits before several provisions in the new law actually take effect.

But sticking with the most basic explanation for a moment, why do health care costs continue to rise?  The answer to this question is less simple.  Many experts believe our health care system continues to provide care that is excessive, ineffective or even unneeded.

Will Health Care Reform Help Lower These Costs?

Some of this might start to be partially addressed when the new health care reform law takes effect.  That last sentence is intentionally ambiguous.  Under health care reform, there will be a new center established to look at comparative effectiveness; is the latest and greatest and most expensive treatment really the best?  There are other provisions that change Medicare payments.  And there are also provisions to encourage greater care coordination.  Taken together, these may make a small dent in continually rising health care costs. Other provisions of the bill, including requiring everyone – including the young and healthies—to “get in the pool” should help as well.

It remains to be seen if health care reform will slow the growth in health care costs enough to keep premiums stable.  Since the new law will ultimately require everyone to have coverage, we better hope it does.

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