Health insurance premiums are expected to grow by 10 percent this year — and that’s good news.
In each of the past few years, the average company has been shelling out an additional 14 to 18 percent for health-care premiums, according to The New York Times.
The paper pointed out that three major insurance companies — United Healthcare, Aetna, and Humana — have already scaled back their premium increases for this year. It noted that Aetna, for example, indicated to Wall Street analysts that its premiums will probably rise between 8 percent and 9 percent in 2004, compared with 14 percent in 2003.
Why is premium growth slowing down?
A major factor, according to the Times, is last year’s decline in the costs of insured care provided by hospitals and physicians; fewer people were hospitalized, and consumers were less inclined to shell out more for expensive drugs. As a result, insurers made more money than they had been anticipating, enabling them to trim planned premium increases for this year.
“The fact that cost trends are slowing will lead to slowing premium trends,” Paul Ginsburg, president of the nonprofit Center for Studying Health System Change, told the Times.
Another reason for the premium growth slowdown is growing competitive pressure. A number of the Blue Cross and Blue Shield companies that are still nonprofit organizations — such as those in Rhode Island, New Jersey, Pennsylvania, Maryland, Tennessee, and North Carolina — have big surpluses. Regulators and legislators are pushing them to limit the amount they raise premiums, or even to provide rebates, the paper pointed out.
And when Blue Cross and Blue Shield plans request lower rate increases, they put pressure on the commercial insurers to scale back their rate hikes as well.
In addition, noted the Times, the insurance business has become more competitive. Jobs are being lost in industries known for offering generous benefits packages, like manufacturing, and being added by small businesses and service industries that tend to provide skimpier benefits, if they provide any at all.
“There’s no question now I’m seeing pricing that can’t be rationalized,” Michael McCallister, chief executive officer of Humana, told the paper. The company is holding its price increases to between 7.5 percent and 9.5 percent in 2004, down from 12 percent to 14 percent in 2003.
The largest employers, which typically self-insure their health plans, are keeping cost increases per worker between 6 percent and 8 percent, reported the Times, citing Helen Darling, president of the National Business Group on Health, a Washington-based association of large companies.