After several years of more modest increases, 2011 brought companies and consumers sharply higher health insurance premium increases—and questions about the factors behind the increased rates.
A September 2011 Kaiser Family Foundation study showed the average annual premium for family coverage through an employer grew to $15,073 in 2011. That’s 9 percent higher than the same premium in 2010, and a dramatic contrast to the preceding several years, when premium increases of 3 percent to 5 percent were common. The overall trajectory, however, has always been up. The cost of family coverage has nearly doubled since 2001, though wages have increased by just 34 percent.
Medicine: Ever more expensive
Ask a health insurance company why premiums are going up, and they’ll say that it’s simple: Medical costs are also on the rise.
It’s a fair point, says Sandy Walters, executive vice president and senior consultant at Kelly & Associates Insurance Group Inc., a brokerage, product distributor, and third-party administrator based in Baltimore. “Technology in phones and computers gets cheaper as the industry gets more mature. Medicine is different. In medicine, technology drives costs up, even as the industry gets more mature. Procedures are more expensive because they use more technology,” he says—and they use more technology because patients demand the quick, accurate diagnoses and treatments they think technology offers.
PPACA: The big question mark
Both insurers and hospitals are raising their rates in anticipation of fully implemented health care reform.
“About three years ago hospitals and doctors thought there would be single payer. They thought they’d better get their money while they can. They don’t know if the Feds are about to dictate their price, so if cost control shows up, they’ll be negotiating from a high point,” Hunt says.