Feb. 18, 2010, Washington, D.C. - America's Health Insurance Plans (AHIP) President and CEO Karen Ignagni today released the following statement regarding premium increases:
"It's time to stop the politics of vilification and focus on what Americans need most: real health care reform that addresses the serious and urgent problems facing our nation.
"Increases in the cost of coverage in the individual market shine a spotlight on the urgent need to reduce the growth of underlying medical costs and to bring everyone into the system. If reform doesn't address these pieces, it will not solve the serious problems that individuals, families, and employers face. That is why health plans have proposed fundamental reform of health insurance markets and a long-term strategy to reduce rising health care costs.
"Health insurance premiums are increasing in the individual market because of soaring medical costs and because younger and healthier people are dropping their coverage due to the economy. In 2009, according to a report from the Department of Health and Human Services' Centers for Medicare and Medicaid Services released on January 5th, rising costs for hospitals, physicians, and prescription drugs led to the largest growth in health care spending as a share of GDP since the government started keeping track 50 years ago. At the same time, the portion of premiums that went towards health plans' administrative costs and profits declined for the second year in a row."
Facts about rising health insurance premiums
- In every state, health plans have to provide actuarial justification for any premium increases.
- Federal government data confirms that rising health care costs are driven by increased spending on hospital care, physician services, and prescription drugs.
- AHIP recently sent a letter to Capitol Hill to highlight the key factors contributing to increases in health insurance premiums. These factors include:
- sharp increases in provider rates;
- increased cost-shifting as providers seek to offset the costs of treating more Medicaid patients;
- an increase in uncompensated care costs;
- consolidation among hospitals and other health care providers;
- a wide range of new state laws, including benefit mandates, regulations, and premium taxes; and
- economic factors that have caused some people to drop coverage resulting in a risk pool that is more heavily weighted with older, less healthy persons.
- According to National Health Expenditure Accounts, health plan administrative costs have fallen over the past two years from 12.8% in 2006 to 12.5% in 2007 to 11.7% in 2008. (See Table 12)
Facts about health plan profits
- Fortune 500 puts the health plan industry profits at 2.2%, 35th on its list of profits by industry sector. This is below other sectors of the health care industry.
- According to Yahoo! Finance's latest analysis of quarterly financial data, the net profit margin for the entire health care sector is 11%. Using the same index, health plans have a 3.4% net profit margin.