Increased regulation and numerous changes have become standard in the health insurance industry lately, but a possible new regulation that could take effect on a federal level later this year would call for increased scrutiny on any health insurance premium hikes above 10%. Colorado already has a robust rate review process, and added additional analysts last year in order to be able to carefully examine rate increase proposals from the hundreds of carriers in the state.
Even though carriers have to now be in compliance with the new medical loss ratio rules (requiring that at least 80 cents of every premium dollar go towards paying medical claims), the Colorado Division of Insurance announced last month that the average individual health insurance premium in Colorado will be 12.9% more than it was in 2010. This comes even though the Division of Insurance spent the fall thoroughly reviewing all of the rate proposals submitted by the carriers, making sure that all of the proposed increases were justified based on the cost of providing care.
Even with the new MLR guidelines and a significant review from the Division of Insurance to make sure this year’s rate increases are appropriate, our average rate increase is still nearly 13% – significantly higher than the 10% threshold that would trigger a review under the proposed federal regulation.
Health insurance premiums are where most people feel the sting when it comes to the rising cost of health care. But focusing regulations primarily on the health insurance industry isn’t going to be a particularly effective way to bring down premiums. As long as the cost of care continues to climb at its current pace, we can scrutinize health insurance premium hikes all day and still find them to be justified based on the cost of care. Because our health insurance system serves as an intermediary between patients and the actual cost of health care, most people tend to be relatively unaware of the total cost of care, or how much that cost increases from one year to the next. Although a thorough review of premium proposals makes a lot of sense, there needs to be a renewed focus on ways to actually reduce the cost of health care, so that the proposed premiums don’t have to be so high in the first place.