Although insurance companies have seen three straight years of record profits, they continue pushing for higher premiums that they say will protect against any sudden increase in demand or cost of care, reports the New York Times.
The gains reflect cost-conscious patients who are delaying medical care, a boost in investment income and lower administrative spending, according to the Boston Globe. UnitedHealth, for example, told analysts that so far this year insured hospital stays actually decreased in some instances. In reporting its earnings, Cigna talked about the "low level" of medical use.
Almost all double-digit premium increases charged to employers in recent years have been passed on to their workers through higher deductibles and copayments, forcing many to postpone medical care such as elective procedures and imaging tests, notes the Globe. "There's been a cutback in [healthcare] utilization, and the insurers have benefited," said Stuart Altman, national health policy professor at Brandeis University.
Health plans have prospered by pricing policies above costs, Robert Laszewski, an insurance executive-turned-consultant, told the Times. The industry goes through underwriting cycles where the companies are better able to predict costs and make room for profits. "They're benefiting from a very positive underwriting cycle," he said.
"Now the question is whether in the future it will lead to a moderation of premium increases. When the insurers are doing well, it puts more pressure on regulators to come down like a ton of bricks on them," Altman said. "They don't have the flexibility they had in the past to raise rates without regard to what the state might do."
In California, for example, regulators have been resisting requests from insurers to raise rates by double digits.
Yet 2014 and 2015 are likely to be far more challenging, as insurers are forced to adapt to the reform law's greatest changes, like providing coverage to everyone regardless pre-existing conditions. "I think they're going to go through a winter," said Paul H. Keckley, executive director of the Deloitte Center for Health Solutions.