Modern Healthcare reports that health insurance inflation is up 10.7 percent from one year ago. Its analysis suggests that this huge spike in health insurance costs is likely attributable to higher administrative costs in managed care. What does this say about the future of commercial health insurance?
To be clear, this huge increase in health insurance costs bears no relation to increases in prices for medical care services. Those services rose between 0.4 percent and 1.4 percent in the last year.
The increase in health insurance prices also has nothing to do with insurance premiums. Rather, it has to do with the amount of money that insurers paid out for medical care. Insurers are spending less on care and retaining more for administrative services and profits.
One explanation for this huge hike in health insurance prices is the growth of managed care. Health insurance costs increase when insurers pay about the same or less for medical services and spend more on administrative costs.
Insurers may need to refund a portion of premiums. Federal law requires insurers to spend at least 80 percent of premium dollars on medical care. If they do not, they must refund the excess money to their enrollees.
Higher administrative costs do not hurt insurers. The eight largest commercial insurers generated $21.9 billion in profits in 2018.
Here’s more from Just Care:
- Drug costs: A big chunk of your insurance premium
- Could you pay more in Medicare Advantage than traditional Medicare?
- People with serious health needs more likely to disenroll from Medicare Advantage plans
- To save money on your care, consider using a free health clinic
- To save money, calories and your teeth, stay away from sports drinks