Health care costs and premiums go hand-in-hand it is a question asked hundreds of times: “Why are my health care premiums going up when I only went to the doctor once?” A lot of people think their premiums increase only because they’ve used too many health care services — like what happens to your car insurance if you get too many speeding tickets. But that’s not how individual health plans work. Premium adjustments are based on age, location and — most importantly — the expected cost to pay members’ claims in the upcoming year. As that cost continues to go up, premiums go up. Even for people who don’t use a lot of health care services. The fact is that costs are rising rapidly within the whole health care system. By 2019, the U.S. will spend about $4.4 trillion on health care. Yes, trillion with a “t.” It’s hard to wrap your head around a number that big, isn’t it?
Here’s what it really means:
– Almost twice what we spent in 2007
– About 1/5 of our economy
-More than $13,000 per person each year
Health care fraud
The National Health Care Anti-Fraud Association estimates conservatively that 3% of all health care spending is lost to health care fraud each year. That’s $68 billion a year — or more than $180 million per day.
Complying with laws
It is estimated that private health insurers nationwide spend more than $339 billion a year to comply with government regulations. Some of this money is used to pay for required services like screenings. But more than half is spent on regulatory costs such as filing and reporting.
Cost shifting
There is a significant difference between Medicaid and Medicare reimbursement rates and the rates of private insurers. One report estimates this leads to health care cost increases of about 10%, or $1,788 yearly, for a typical family of four that has private health insurance.
Inflation
Just as we spend more today for a gallon of milk than we did 20 years ago, we spend more for health care services. This health care price inflation outpaces general inflation and drives 51% of the growth in health care spending.
Now: Stay grandfathered or not?
For many people, the big decision right now is whether to stay in a grandfathered plan or move to a new plan. This decision depends, in part, on how important the extra benefits are to a person.
| Individual plan members’ reasons to stay grandfathered | Individual plan members’ reasons to not stay grandfathered |
| Plan does not need to include some benefits the health care law requires for newer plans (this may help control costs over time for the plan, but it doesn’t guarantee rates will be lower now or in the future) | Plan includes all of the additional benefits the health care law requires, such as expanded preventive care and more access to coverage for kids |
| Plan designs not limited to certain categories starting in 2014 (see the “Exchanges” column below for details) |
More flexibility to manage premiums through benefit changes like increasing the deductible |
| Plan eligibility and pricing based on the old rules, not the new rules that take effect in 2014 (as described on the previous page) |
Not part of a “closed” version of a plan (a closed plan is no longer sold to new applicants, so it’s possible that premiums or costs may increase because new, healthy applicants are no longer being added to the closed “pool” of members) |
In 2014, individuals will be able to buy plans like they do today, or they can buy through an exchange. Here are some key ways these options will be similar and different:
| Individual health plan market | Exchanges |
| Plans must include certain benefits, called “essential health benefits” |
Plans must include certain benefits, called “essential health benefits” |
| Plans must cover at least 60% of costs for in-network covered services |
Plans must cover at least 60% of costs for in-network covered services |
| The state decides who is eligible to sell plans | The state decides who is eligible to sell plans, but the exchange could further limit who participates |
| Different plans and prices so individuals can compare and choose the benefits and premiums that work best for them, but plans will need to fit one of five categories: Platinum (90% coverage), Gold (80% coverage), Silver (70% coverage), Bronze (60% coverage) or “catastrophic coverage” (only for people who are younger than 30 or qualify because of financial hardship) |
Different plans and prices, but plans will need to fit one of five categories: Platinum (90% coverage), Gold (80% coverage), Silver (70% coverage), Bronze (60% coverage) or “catastrophic coverage” (only for people who are younger than 30 or qualify because of financial hardship) |
| Buyers can enroll in a plan the same ways they do it today — for example, by working with an agent or broker, working directly with the company you’re buying from or going to a website that shows plans from several companies | Subsidies will be available for those who earn between 133% and 400% of the Federal Poverty Level* (*$89,400 for a family of four today, based on HHS guidelines for 2011)Buyers can enroll online or in other ways; specially trained people called “navigators” will help with enrollment (depending on exchange rules, agents may act as navigators) |
