Health insurance costs deal blow to Obama

Health insurance costs deal blow to Obama

The cost of health insurance has surged in the US this year, according to a survey of employers, dealing a blow to claims by the Obama administration that healthcare legislation introduced last year would curb costs.

Insurance premiums for family health benefits in 2011 jumped 9 per cent from a year ago to $15,073, according to a study released on Tuesday by the Kaiser Family Foundation. That represented a sharp acceleration from 2010, when premiums rose by a modest 3 per cent, and easily outpaced a 2 per cent rise in wages.

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“This year’s 9 per cent increase in premiums is especially painful for workers and employers struggling through a weak recovery,” said Drew Altman, Kaiser’s chief executive.

Health insurance premiums have more than doubled during the past decade and, although the survey reveals some of the early impact of the law, it does not provide reasons for the increase.

Kaiser said that it was beginning to see changes in preventative care benefits and many companies were enrolling young adults into corporate health plans plans because of the law. However, it said that most workers that were already enrolled in company plans are exempt from the law’s provisions.

Matthew Borsch, healthcare analyst at Goldman Sachs, said the increase could be due to the high rate of increase in family coverage, due to a new provision allowing people up to the age of 26 to join their parents’ plan, creating additional costs. He also noted that some measures in the law that were intended to contain costs were watered down.

Critics of the legislation latched on to the report as evidence that the law was failing.

“Policymakers in Washington and the states need to focus on all of the factors that are driving premium increases: soaring prices for medical services, changes in the covered population that has resulted in an older and sicker risk pool, and new benefit and coverage mandates that add to the cost of insurance,” said Karen Ignagni, chief executive of America’s Health Insurance Plans, an industry group.

Critics of the industry argue that insurers should not be raising premiums because they have benefited from low medical utilisation rates due to the prolonged economic downturn deterring people from procedures that are not essential.

The Obama administration offered a rebuttal of the study, arguing that premiums were set last year when insurers anticipated higher medical costs and that premium prices would decline as more provisions in the law were rolled out. Nancy-Ann DeParle, who is President Barack Obama’s deputy chief of staff, said that other measures showed healthcare costs declining and called out insurers for raking in profits.

“The Kaiser report is informative but it’s a look backwards,” Ms DeParle said. “When we look to the future, we know that the Affordable Care Act will help make insurance more affordable for families and businesses across the country.”

Brophy Tuesday 27 September 2011 - 3:11 pm | | Brophy Blog

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