What Is To Blame For Less Affordable Health Insurance?

A recent statistic from global consultancy Hewitt Associates is sobering. As reported in Newsweek magazine, employers’ health insurance costs will rise by 8.8 percent in 2011. That is the highest level in five years.

Obviously, the blame game has already started. The Barack Obama administration, along with many liberals, have put the blame on allegedly greedy health insurers. According to progressives, insurers are jacking up their rates beyond either general or medical inflation in order to maximize their profit margins before new regulations and consumer protections go into effect. These actions also have the side effect of decreasing support for the legislation among those who decide that the correlation is the same as causation–although that remains to be proven.

Meanwhile, health insurance companies are blaming politicians. Specifically, in the future they will be mandated to provide coverage for more preventative care conditions. Although some experts predict that doing so will lower their costs in the long run (by having their customers avoid developing chronic diseases that are expensive to treat), it is more costly in the short run.

The healthcare reform provision that will benefit insurers the most, the individual mandate, is not scheduled to go into effect until 2014–and the Supreme Court may end up striking that portion of the law down as unconstitutional. Meanwhile, this week brings the requirement that group health insurance companies allow the adult children of employees to remain on their coverage until the age of 27; in a recession that has left millions in that demographic unemployed, a high percentage will probably take advantage of that benefit. Meanwhile, annual or lifetime coverage limits have now been banned.

Insurers also feel that they need to earn as much money as possible before the medical loss ratios kick in, which will not allow them to spend over 20 percent of the premiums they collect on administration and profit. As some consumers drop their coverage due to cost, they must charge more to existing policyholders.

Most likely, all of these elements should share blame for the rate hikes. Unfortunately, it is the average American who is left with less affordable health insurance. Employers are passing an increasing percentage of out-of-pocket costs to their workers.