It’s hard to fathom why the average annual premium for employer-provided family health insurance rose 9 percent from 2010 to 2011, when workers’ salaries increased an average of 2 percent and overall inflation was only 3.2 percent.
But one thing it clear: Those sorts of price hikes are unsustainable in a U.S. economy that is struggling to avoid a double-dip recession, during which many employers are considering whether to stop offering health insurance to their workers and many workers are opting to go without insurance.
Exactly what caused the increase is the subject of considerable debate.
Critics of the Affordable Care Act — also called Obamacare — were quick to point to that 2010 legislation as the culprit. And, it appears, at least a portion of the increase can be attributed to it.
The Kaiser Family Foundation, which released the study this week showing the increase in insurance premiums, said provisions in the act — such as allowing adult children to remain on their parents’ health-insurance plans until age 26 — probably accounted for 1 percent or 2 percent of the 9 percent increase.
Rising health care costs, particularly from prescription drugs and hospital charges, also contributed to the rate hikes, representatives of the insurance industry said.
But, according to The New York Times, insurance companies also raised prices in anticipation of Obamacare requirements that don’t kick in until 2014. Additionally, they hiked rates because they apparently believe the economy will soon turn around and Americans will start using more health care services than they have throughout the current economic crisis.
They must be talking to different economists than the rest of this planet. Nearly every economic forecaster is saying a real economic recovery is at least a year away. Some say it won’t occur for two to three years, or longer.
Furthermore, while we understand that providing health insurance isn’t the same as selling widgets, we also know that most businesses — whether they sell services or products — base their prices on existing reality, not on rosey speculation about what the economy may do.
All this has been occurring while major insurance companies have been recording high profits. In fact, they’re in their third year of very high profits, based on news stories this past spring. One reason for the higher profits, insurance executives said then, was that people weren’t using medical services as much as they once did. Yet firms are raising rates in anticipation that they will.
The Affordable Care Act certainly has its faults. We’ve outlined some of our objections to it in previous editorials. But one reason that President Barack Obama and congressional leaders were able to persuade a majority of members of Congress last year to approve it was the unsustainable nature of the old health care regime.
The Kaiser Family Foundation report suggests we’re heading back toward that same old unsustainable level, in which health care costs and insurance rates far outpace the ability of workers and employers to absorb these sorts of increases. And that will lead to even more demands for changes.
If that occurs, even the insurance industry’s high profit margins may become unsustainable.