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Life Health > Health Insurance > Life Insurance Strategies

Study: Health Increases Drive Rate Increases

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New treatments, new technology, provider consolidation and increased demand for medical care may be responsible for about 4.3 percentage points of the 8.8% increase in health coverage rates between 2004 and 2005.

Researchers at PricewaterhouseCoopers, New York, have published figures supporting that conclusion in a study sponsored by America’s Health Insurance Plans, Washington.

Many media reports discuss the effects of cost-shifting, the aging of the U.S. population, and lifestyle problems such as smoking and obesity on health costs, but they appear to be responsible for a total of just 1.3 percentage points of the 2004-2005 increase, the researchers report.

Defensive medicine accounted for 0.8 percentage points of the cost increase, the researchers report.

The researchers attributed the rest of the increase to general inflation.

Provider consolidation has played a key role in pushing up health care and health coverage costs, according to Michael Thompson, a PricewaterhouseCoopers principal who worked on the study for AHIP.

“In general, we’ve lost a little bit of the competitiveness within the system,” Thompson said.

But health plans succeeded at using multi-tier health plans and other techniques to hold prescription drug cost increases to 8.6%, and the number of new state health insurance benefit mandates fell.

AHIP President Karen Ignagni attributed the drop in mandates to a 2002 study that AHIP sponsored. That study, which pointed to mandates as a major factor in health premium increases, “was a material factor in changing how states looked at mandates,” Ignagni said.


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