Health insurance premiums are up; Congress may make problem worse.Posted: October 14, 2009
One way that employers cope with soaring health insurance costs is by shifting some of the burden onto employees via higher deductibles and greater cost-sharing. That trends appears set to continue in 2010, according to the Wall Street Journal:
As companies begin unveiling their workplace benefits for next year, many employees are learning they will have to dig even deeper into their pockets for health coverage.
Such price increases have become a fact of life during open-enrollment season, when workers sign up for their health plans. But the jump is expected to be steeper in 2010 than this year, as employers struggle with the impact of the recession and continually rising insurance costs. Employees will pay $4,023 on average in premiums and out-of-pocket charges next year, up 10% from 2009, according to a projection from Hewitt Associates, a benefits-consulting firm. In dollar terms, it’s the biggest boost since the firm started keeping track of the data a decade ago.
For workers, that will mean larger payroll deductions, as well as spending more on co-payments and other fees tied to care. Companies also are expected to prod more employees into cheaper coverage by getting them to sign up for high-deductible health plans. And many employers are trying to rein in the expense of covering workers’ families, sometimes by making insurance for kids and spouses pricier.
Some hold out the hope that health insurance reform will reduce the rate of growth in health insurance premiums. However, the bill that was approved by the Senate Finance Committee yesterday will do no such thing. The problem: the bill combines guaranteed issue (requiring insurers to accept anyone who applies) with a weak mandate (which gives healthy people an incentive to forgo coverage until they get sick).
As Charles Murray of the American Enterprise Institute notes,
[F]or political reasons, the Finance Committee gutted the requirement for young people to buy insurance, making the penalties so low that it destroys the coherence of the bill. Of course large numbers of young people won’t buy insurance if the penalties are a few hundred dollars. Of course large numbers of them will wait, knowing that they can apply once they’ve got a health problem and the insurance companies will have to accept them. This is not a “plausible possibility.” It is 100 percent sure to happen. And because it will happen, health insurance premiums will rise dramatically…
I lived in Washington State for several years in the 1990s, shortly after that state enacted guaranteed issue and other reforms that were supposed to expand access to individually-purchased health insurance. Unfortunately, these reforms had the opposite of the intended effect: premiums soared, enrollment plunged, and health insurers stopped offering generous plans. These results are very common in states that implement guaranteed issue without simultaneously mandating coverage. Unfortunately, Congress may be on the verge of repeating the states’ mistakes.