2016 Individual Health Insurance Premiums

I admit I never tire of reminding people that the Administration told us that the reform law would lower health insurance premiums, while many experts postulated that, as written, it could only have the opposite effect.  And we have seen that rates are in fact not lower.  A new analysis by the Wall Street Journal finds that in many states, individual health insurance policyholders will be asked to bear hefty premium increases in 2016.  (WSJ Article)   The article gives several examples of really hefty rises, such as an average 52% increase in New Mexico, or 36% in Tennessee or 30% in Maryland.  In general, in states where premiums were lower in 2015, the biggest increases are being requested for 2016.  Even in states with more “moderate” increases, say 10% in Michigan or 8.4% in Vermont, the growth is a significant hit to consumers.  More recently, a large insurer in Kansas filed for a 38% increase and one in Iowa for an 18% rise.  While the states can review these increases and may get them lowered somewhat, they undoubtedly are supported by insurer data showing that their health care claim payments in 2014 and 2015 were far above what they projected as they set rates for those years.  And regulators don’t want to see insurers in financial difficulty, already some of the federally-financed coops have had to shut down because of ludicrous rate-setting practices.

The reason these  increases are not surprising is that they merely reflect the normal dynamics of health insurance.  The government can’t literally make everyone buy health insurance and many people are choosing not to, either ignoring or paying the penalty for failure to be insured, or seeking one of the broad exemptions.  The people who have the highest health needs are the most likely to buy.  So insurers almost always end up with a population with higher costs than they projected.  So they raise premiums, which among other things, leads to the unvirtuous circle of more people, usually those with lower health costs, deciding they aren’t going to buy insurance.  And so on, til you have the New York individual health insurance market prior to reform.  And even if everyone did buy health insurance, health care service and product prices aren’t going down, especially in commercial market.  While utilization has been essentially flat in most categories, obtaining insurance usually ultimately leads to an upswing in demand from the newly-insured population, although that effect has been relatively muted due to high cost-sharing in most individual policies.  We shouldn’t count on utilization growth remaining so low, and we should anticipate that health care prices will continue to rise at rates above either economic growth or inflation or personal income.  And therefore, health insurance premiums are going to keep going up as well.  All perfectly predictable, except apparently to the morons (excuse me, but its hard to be restrained all the time) responsible for this “reform” law.