As Americans renew their health insurance for the coming year, many are finding their premiums are going up. Insurance companies are raising rates — in some cases dramatically — and some are telling their customers that the new health reform law is to blame, as NPR reported this morning. But as the NPR story explains, health reform is hardly at fault for rising premiums.
The reality is that premiums have been rising for years. The cost of family coverage provided through an employer has gone up nearly 9 percent a year over the last decade, on average.
The primary reason for this year’s premium increases is the same one that has driven up premiums much faster than inflation over the years: rising health care costs. Even the insurance industry’s trade group, America’s Health Insurance Plans, acknowledges that. The good news, as we’ve explained here, is that the health reform law will take important first steps toward bringing health care costs under control in the years ahead.
In some cases, insurers are imposing premium increases that are simply unjustified. In California, for example, the state found that insurers offering coverage in the individual market made significant errors in calculating their premium increases. Fortunately, the health reform law gives states new resources to help them review insurers’ premium increases to ensure that they actually reflect rising health care costs.
The new law does play a small role in the rise in premiums for next year, perhaps causing about 1-2 percentage points of the increase. In exchange for that, however, consumers are getting important new benefits and protections. For example, insurance companies will no longer be able to impose lifetime limits on health benefits or cancel beneficiaries’ coverage when they get sick, and children can stay on their parents’ health plans until age 26.