Increased utilization, higher costs driving up premiums, insurers say

Insurers, which must justify rate hikes of 10 percent or more, blame increasing premiums on medical costs, not healthcare reform, concluded a new issue brief from the Commonwealth Fund.

Medical costs--based on more utilization of services and higher unit prices for those services--drove more than three-quarters of large rate increases for nongrandfathered individual and small group plans with more than 150 members, according to the summary.

The study looked at 163 rate filings by 122 insurers in the individual market and 148 filings by 105 insurers in the small group market that took effect from July 2012 through July 2013. It found increased medical expenses accounted for the entire average amount of requested rate increases in the individual market and 72 percent in the small group market.

Regarding medical cost drivers, insurers in the individual market attributed 26 percent and insurers in the small group market attributed 31 percent of  medical cost growth to increasing use of medical services. And they attributed more than half of increased medical costs to higher unit prices.

Insurers did not blame requirements to issue a health plan to any applicant or bans against charging higher premiums based on health status and other characteristics, likely because those provisions do not kick in until 2014, the Commonwealth Fund noted. The most frequently cited healthcare reform-related driver, mentioned only in a third of the rate filings, was the mandate for preventive and contraceptive services for women without patient cost-sharing.

The Affordable Care Act had a minimal financial effect that ranged from about 3 percent of a premium to one-third of a percent.

However, recent polls suggest many Americans fault the ACA--as opposed to employers or the economy--for more costly health insurance.

Yet the reform law's rate review program boosted state regulators' oversight and scrutiny of insurer rate hikes, saving consumers $1.2 billion on health insurance premiums last year, according to the U.S. Department of Health & Human Services. The average rate request dropped 12 percent in the individual market and 19 percent in the small group market.

To learn more:
- here's the summary and full issue brief (.pdf)

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