As the health insurance market struggles to manage the ongoing uncertainties of implementing the 2,700 pages of healthcare reform legislation passed by Congress and signed into law by President Obama, other market forces are at work to ensure that the world of health insurance remains a turbulent one.
According to the 22nd National Health Care Trend Survey by Buck Consultants, the costs for the most popular types of healthcare plans will go up by more than 10% next year, on average. Almost across the board, the projected increases in costs for preferred provider organizations, point of service plans, health maintenance organizations and high-deductible health plans are the highest they have been in three years. Buck notes that the anticipated rises in costs are largely due to expanded services mandated by healthcare reform, but that economic uncertainty also plays a role. With unemployment expected to top 10% before it begins going down again, the potential for laid off employees, who tend to be older and have higher claims histories, must be accounted for. Similar forces are also at work on dental and vision plans, which are also expected to get more expensive in the coming year.
This is bad news for policyholders, who are being asked in large numbers to bear an increasing share of the costs of healthcare. The Kaiser Family Foundation and the Health Research & Educational Trust notes in its recent research that the average total premium for family coverage is currently at $13,370, and the employee share of that amount has gone up 14% this year alone, to $3,997. Over the last five years, employees’ premium contributions have gone up by 47%, and overall premiums have risen 27%.
The issue of rising healthcare costs is already becoming a media staple, as open enrollment season begins, and employees must choose which healthcare package will see them through to the following year. In many cases, plans will be hitting policyholders with rate increases, sometimes moderate, sometimes severe. The larger point is that healthcare is getting more expensive across the board, and one way or another, insurers must find some way to get policyholders to become bigger cost-sharing partners than they have been in the past.
Kaiser notes that more than 25% of employees have annual deductibles of $1,000 or more, which helps keep down higher-frequency claims such as emergency room visits. Health plans are also making increased use of coinsurance, which defrays the cost of big-ticket procedures such as child delivery. Adult children dependents, while they can no longer be cut from plans thanks to the federal reform package, can be charged for independently, which makes their coverage less of a free ride. Plans may also begin making greater use of assessing policyholders with surcharges for spouses who could be insured through their own employers. Plans are also stressing that policyholders take care of preventative wellness plans, which is nothing new.
Such austerity measures are sure to gain a huge amount of negative feedback for the industry, but this could very well be another case of an unpleasant reality that everyone has to share, not just healthcare providers. Lest we forget, federal legislation is imposing sharp medical loss ratio requirements on the health insurance industry as it is, which is keeping profits fairly trim. And if anybody needs any more evidence that times are tough all over, just look at Microsoft – the software giant is synonymous with corporate profit, and yet even it is finding it necessary to ask its 90,000 employees to pick up an increased share of the company’s generous healthcare benefits, starting in 2013. Those looking for a clear-cut bad guy in this story aren’t likely to find one unless they have an axe to grind.
Perhaps the worst thing about the increased cost situation is that as the public and the industry push and pull to make ends meet, there is a bigger, and really, a more important issue unfolding. For years, the number of physicians has been declining in this country, for a number of reasons, not the least of which is the skyrocketing cost of medical malpractice insurance. (This alone has decimated the OB/GYN provider network in states such as West Virginia.) But also to blame is a sharply increasing demand for care, and a constricted number of residency positions. According to the AAMC Center for Workforce Studies, there is a growing gap between the number of doctors the country has and the number it needs. At present, that gap is around 13,700, but unless conditions change, the gap will grow to 130,600 by 2025, thanks to an exploding population, increased demand created by healthcare reform, and simply not enough doctors. This, more than anything else, is a catastrophe in the making, and it is not one that somebody can simply point a finger at the insurance industry over, either. Doctors of all specialties have been making it clear for years how difficult it is becoming to maintain a practice and yet nothing has been done to enable this industry to keep going. Perhaps when the sticker shock of open enrollment sinks in this quarter, and the inevitable onslaught of stories filters through the media of people grousing over the cost of healthcare, and people raising an eyebrow in the direction of the insurance industry, the industry can point to the doctor shortage and say, “Yes, the costs hurt. But you know what hurts more? Not having a doctor. Now what are we going to do to fix this?”