Pre­mi­ums see 160% rise since 1999, far out­pac­ing in­fla­tion

Med­i­cal care de­clined as prices soared rapidly

Modern Healthcare - - MODERN HEALTHCARE - Melanie Evans —with Rich Daly

The rise in health­care costs picked up this year even though the econ­omy hasn’t, de­spite cost-con­trol ef­forts by law­mak­ers, busi­nesses and the health­care in­dus­try, a sur­vey of em­ploy­ers found.

The sur­vey, re­leased last week by the Kaiser Fam­ily Foun­da­tion and Health Re­search & Ed­u­ca­tional Trust, found pre­mi­ums for health ben­e­fits pro­vided by em­ploy­ers in­creased 8% for in­di­vid­u­als and 9% for fam­ily cov­er­age. That’s com­pared with an­nual premium growth of 3% to 5% since the re­ces­sion be­gan for in­di­vid­u­als and fam­i­lies (See re­lated editorial, p. 22).

Re­searchers also high­lighted the rapid ac­cel­er­a­tion in premium growth com­pared with over­all in­fla­tion since 1999. Fam­ily pre­mi­ums in­creased 160% through this year, while in­fla­tion climbed 38%.

“I think it’s a re­ally im­por­tant in­di­ca­tor that we have not solved the cost prob­lem in this coun­try and that we sim­ply can­not af­ford to sus­tain these kinds of in­creases,” said Sabrina Cor­lette, a re­search pro­fes­sor for the Georgetown Univer­sity Health Pol­icy In­sti­tute.

Higher prices were most likely be­hind the higher pre­mi­ums as use of med­i­cal care de­clined amid a weak econ­omy, she said. “This was quite a jump and one that I’m not sure that peo­ple ex­pected given that uti­liza- tion has been in a trough,” Cor­lette said. She pointed to re­cently pub­lished re­search that found sig­nif­i­cantly higher fees paid to U.S. physi­cians than doc­tors in Aus­tralia, Canada, France, Ger­many and the United King­dom (Sept. 12, p. 6).

Providers should bear some re­spon­si­bil­ity for ris­ing health­care costs, and health plans should do more to ex­am­ine costs and ne­go­ti­ate rates, rather than sim­ply pass ris­ing costs onto em­ploy­ers and house­holds, Cor­lette said.

Nancy-Ann DeParle, as­sis­tant to the pres­i­dent and deputy chief of staff, wrote in a blog post that the rise in pre­mi­ums could be at­trib­uted to er­ro­neous pro­jec­tions for med­i­cal costs made by in­sur­ers last year and an­tic­i­pa­tion that in­sur­ers’ costs could climb un­der the Pa­tient Pro­tec­tion and Af­ford­able Care Act. She dis­missed both pro­jec­tions as wrong and said in­sur­ers prof­ited as a re­sult of higher pre­mi­ums and lower-than-ex­pected costs.

In a state­ment, Amer­ica’s Health In­sur­ance Plans, an in­sur­ance trade group, re­jected the sec­tor’s prof­its as a rea­son for ris­ing pre­mi­ums and said costs have climbed un­der the Af­ford­able Care Act.

Cor­lette said pro­vi­sions of the Af­ford­able Care Act that ex­panded cov­er­age and ben­e­fits ac­count for 1 to 2 per­cent­age points of the premium growth, based on her re­view of state rate fil­ings for in­di­vid­u­als and small em­ploy­ers. She stressed that her re­view was not com­pre­hen­sive.

The Kaiser and HRET sur­vey, which in­cluded em­ploy­ers of all sizes, at­trib­uted 2 per­cent­age points of the 9% in­crease in fam­ily pre­mi­ums to Af­ford­able Care Act pro­vi­sions that pro­longed cov­er­age of adult de­pen­dents to age 26 and man­dated pre­ven­tive ben­e­fits. “Clearly, there has been an im­pact,” said Gary Clax­ton, a vice pres­i­dent for Kaiser and co-ex­ec­u­tive di­rec­tor of the Kaiser Ini­tia­tive on Health Re­form and Pri­vate In­sur­ance, about the fed­eral law.

The White House de­clined to com­ment on re­searchers’ es­ti­mates for added costs from the law. DeParle called the Kaiser re­port in­for­ma­tive, “but it’s a look back­wards,” she con­tin­ued.

“When we look to the fu­ture, we know that the Af­ford­able Care Act will help make in­sur­ance more af­ford­able for fam­i­lies and busi­nesses across the coun­try,” DeParle wrote. She also pointed to re­cent pro­jec­tions for 2012 pre­mi­ums in­di­cat­ing slower growth, in­clud­ing that fed­eral em­ploy­ees will see an av­er­age in­crease of 3.8% next year com­pared with 7.3% this year, ac­cord­ing to the Of­fice of Per­son­nel Man­age­ment.

An­drew Web­ber, pres­i­dent and chief ex­ec­u­tive of­fi­cer of the National Busi­ness Coali­tion on Health, also ques­tioned the role prices played in 2011 premium in­creases as the tepid eco­nomic re­cov­ery squeezed house­hold bud­gets and de­mand for med­i­cal care flagged. He de­scribed this year’s premium jump as un­sur­pris­ing, but dra­matic when com­pared with more mod­er­ate over­all in­fla­tion growth.

Web­ber, whose Washington-based not­for-profit rep­re­sents pur­chas­ing coali­tions, said he be­lieves mar­ket con­sol­i­da­tion has fu­eled the premium in­creases, and cited 2010 re­search by the Cen­ter for Study­ing Health Sys­tem Change that found in­sur­ers paid hos­pi­tals within and across eight mar­kets widely dif­fer­ent prices. Re­sults sug­gested hos­pi­tal mar­ket clout led to the vari­a­tion, the re­port said. The Amer­i­can Hos­pi­tal As­so­ci­a­tion re­jected the study as flawed.

Web­ber said em­ploy­ers must do more to de­sign or de­mand more com­pre­hen­sive health ben­e­fits that pro­mote pre­ven­tion and elim­i­nate waste, in­clud­ing fi­nan­cial in­cen­tives for em­ploy­ees to use lim­ited net­works of providers with demon­strated qual­ity and lower costs and au­to­matic en­roll­ment in dis­ease man­age­ment for the chron­i­cally ill.

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