HEALTH CARE COSTS:
Consumers can help lower insurance premiums by changing behaviors.
This week, when I read the headline “Blue Cross proposes premium increases,” I cringed.
Health care premiums are a significant burden on many American families, averaging about $1,000 a month, not counting thousands of dollars people pay in deductibles, co-payments, medical supplies and medications. So I did some research. Health care premiums for private plans are of two types. One is employersponsored health insurance, which 45 percent of Tennesseans receive. Over the past few years, the premiums of these plans for individual coverage have not increased and for family coverage have slowed to a 3 percent annual rise. Blue Cross Blue Shield’s proposed premium increase does not affect these Tennesseans.
The second type of private health insurance is for plans on the newly formed health exchanges under the Affordable Care Act, or Obamacare. An exchange is essentially a one-stop marketplace where consumers can decide among categories of health insurance called platinum, gold, silver and bronze, based on benefit categories. Insurance companies such
as BCBS or Cigna offer plans at varying costs.
Twelve million Americans have purchased plans on the exchanges (healthcare.gov). Of these, 231,000 are Tennesseans and two-thirds of them have the Blue Cross Blue Shield health plan. The rate increase would affect this sizable group.
Why is there such a large premium hike — nearly 36 percent — among the Blue Cross Blue Shield plans?
After speaking with health economists, I learned the answer relates to uncertainty.
In previous years when setting rates, Blue Cross likely underestimated the number of enrollees and their level of illness, as well as their high level of health services utilization when they become newly insured. All of this, combined with lapsing of federal government protections of “risk adjustment” from financial loss for insurance companies, likely has made many insurers gun shy, leading them to propose a hefty hike in premiums.
Nevertheless, the hikes are not a done deal. Insurers have to go through a number of checks and balances, many of which were put in place by the Affordable Care Act, also called ACA.
First, state regulators must approve the rate hike as being justified, after reviewing insurance company data.
Second, the ACA requires insurance companies to spend a minimum of 80 percent of the premiums on medical care or else give their customers rebates. Insurers rebated $1.1 billion in the first year of the ACA and $2.1 billion in the second year.
Lastly, a good way to control premium rates is through market competition. If Blue Cross Blue Shield raises its rates too high, other insurers will jump in. UnitedHealthcare has already initiated a process to provide an insurance product on the Tennessee exchange.
In Tennessee, Blue Cross Blue Shield’s proposed 36 percent increase left many wondering if their subsidies also will increase. About 80 percent of those on the exchanges receive subsidies to help make health insurance affordable. The answer is a “likely yes.” That’s because the subsidy depends on the cost of the premium as a percent of an individual’s income and is benchmarked to the premiums for the second-lowest silver plan.
While the exchanges may seem chaotic and frustrating, for many patients the ACA is life saving. So with this proposed premium hike, I wondered about the future of the ACA. The exchanges are not on the verge of collapsing, but I believe they are going through a market correction.
The exchanges are an innovative, market-driven strategy, which fosters competition, choice, cost savings and quality among insurers. They are an example of managed competition as its best, an idea originally proposed by a conservative think tank, the Heritage Foundation.
So the most important question we must ask is, who ultimately controls the rise and fall in our premium rates? While doctors, hospitals and insurance companies play a large role, we consumers can collectively help to lower our health premiums by changing many of our behaviors.
For example, avoiding unnecessary emergency room visits can save $38 billion. Smoking costs the nation nearly $170 billion in direct medical care. Roughly 11 percent of our aggregated health care expenditure is associated with inadequate exercise, and healthier diets may prevent $71 billion in medical costs associated with diseases such as diabetes.
All of this trickles down to affect our health care premiums.
Finally, another way to lower our premiums is to convince more people, our friends and neighbors, to sign up for health insurance, because on average a family or their employer pays $1,017 extra in premiums for those who are uninsured. It’s time we all do our part.
Manoj Jain is a Memphis physician.