Rate of Health Insurance Premium Increases Likely To Slow to 10% in 2004
The rate of health insurance premium increases likely will slow this year to about 10%, compared with increases of 14% to 18% in the past several years but "still more than double the overall inflation rate," the New York Times reports. According to the Times, the "slowdown in the rate of increase will provide a bit of relief" to employers and employees with health insurance, but the "price of health care coverage will remain a burden." A number of factors have contributed to the slowdown, such as a decrease in cost of care provided by hospitals and physicians for patients with health insurance in 2003. According to CMS actuaries, growth in U.S. health care spending began "a marked slowdown" last year, the Times reports. In 2003, fewer patients were hospitalized, and many "shied away" from more expensive prescription drugs, trends that allowed many health insurers to retain "sizable profits that can enable them to restrain their premium increases this year," the Times reports. "The fact that cost trends are slowing will lead to slowing premium trends," Paul Ginsburg, president of the Center for Studying Health System Change, said. In addition, lower premium rate increases by BlueCross BlueShield Association plans, which have a combined membership of 90 million nationwide, "put pressure on commercial insurers to reign in their increases," according to the Times. A Goldman Sachs analysis for 34 not-for-profit BCBS plans found that between 2002 and 2003, their profit margins increased to 4.8% from 2.5%, their surpluses increased 67% to $8 billion and their reserves increased 30% to $31.9 billion.
Wall Street analysts also maintain that many health insurers have "set hard-to-reach goals for adding members" that might "be achievable only by offering more attractive prices," the Times reports. In addition, health insurers face a "dwindling number of jobs in manufacturing and other fields that traditionally offered generous employer health plans," according to the Times. However, Michael McCallister, CEO of Humana -- which plans to increase health insurance premiums by between 7.5% and 9.5% this year, compared with between 12% and 14% in 2003 -- said that some of the lower premiums offered by health insurers to attract new members "can't be rationalized." Louise Probst, the executive director of the St. Louis Area Business and Health Coalition, said, "While any reduction is good, increases of 10% will still mean virtually doubling our health care costs every seven years" (Freudenheim, New York Times, 5/27).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.