Americans rank health costs as their top financial concern, according to Gallup.
That’s not likely to change anytime soon. Health insurers are requesting massive premium hikes for next year — some in excess of 50 percent.
This shouldn’t come as a surprise. The Affordable Care Act has been driving up costs since its creation. And thanks to a new wave of mergers among health insurers prompted by Obamacare, America’s health cost crisis will only grow worse.
Premiums are skyrocketing nationwide.
Regulators in Oregon just green-lit a 25 percent increase for Moda Health Plan. A popular Utah insurance plan is seeking a 45 percent increase. Blue Cross Blue Shield is requesting price hikes ranging from 23 percent in Illinois to 54 percent in Minnesota.
Nationwide, premiums for the most common plans will increase by an average of 14 percent next year.
Even in states where premium growth is slowing, people are stretching their budgets to pay for insurance. On California’s exchange, rates are slated to increase just 4 percent next year.
But the state’s premiums have long been among the highest in the nation. Folks in northern California will pay $384 a month, on average. That’s $70 higher than the average premium for a mid-level plan nationwide.
It’s no wonder that four in 10 Californians shopping on the exchange say that they struggle to pay their premiums.
Obamacare has caused premiums to spike before, especially for younger folks. Since the law went into effect in 2013, premiums for 23-year-old women have risen an average of 45 percent, while men of the same age experienced 78 percent increases. Premiums for 30-year-olds surged 35 percent for women — and 73 percent for men.
These escalating premiums may cause many young, healthy individuals to drop coverage altogether. After all, what’s the point in paying ever more for coverage they may never use?
If those folks exit the insurance market, those who remain will be older and sicker — and thus more expensive to cover. Insurers will have no choice but to increase premiums further to cover the costs of treating those who keep their insurance. Consequently, even more young folks will opt out of the insurance pool.
Insurance experts call this repeating process a “death spiral,” with costs continuously rising as coverage rates fall.
Recent mergers between insurance companies will only make things worse.
Aetna Inc. — the nation’s third-largest insurer by revenue — just agreed to buy number-four Humana Inc. in a deal worth $37 billion. Number-two Anthem Inc. is paying $54 billion for Cigna Corp., the fifth-largest insurer. And Centene Corp. is slated to purchase Health Net Inc. for about $7 billion.
Obamacare encourages such mergers by raising costs for insurance companies. They must sell policies to all comers. And they can only charge older or sicker folks three times what they charge young, healthy ones. In order to stay solvent, insurers have to rise prices for everyone.
The law also requires insurers to spend no less than 80 percent of individuals’ and small groups’ — and 85 percent of large groups’ — premium dollars on claims.
Insurers argue that they can cut administrative costs by merging — and thus more easily comply with this legally mandated “medical loss ratio.”
But mergers are bad news for consumers. If approved by the Federal Trade Commission and the U.S. Department of Justice, these mega-companies will face less competition — and so have greater latitude to raise prices and reduce services.
Consider the 2007 merger of UnitedHealth Group and Sierra Health Services in Nevada. According to an analysis of the deal published in the journal Health Management, Policy and Innovation, premiums spiked almost 14 percent after the consolidation.
“If there were any benefits to consumers realized from the merger, we could not observe them,” concluded the study’s authors.
Obamacare’s failure is clear. It’s driving up costs, reducing competition, and making health care worse in the process.
And unfortunately, it’s likely here to stay as long as President Obama is in office. If health costs are still Americans’ top financial concern then, they’ll have the power to do something about it — at the ballot box.