With Lower Health Insurance Premiums on the Horizon, How Will Insurance Providers Address Increasing Costs?

The Congressional Business Office released a proposal to reduce health insurance premium costs. Clearsurance.com’s health insurance expert, Melanie Musson, examines potential causes and solutions for increasing insurance premiums. As open enrollment season approaches or has already begun in many places, some policyholders face the shock of drastically rising health insurance premiums. No-deductible health plans are almost expected to be expensive, but even high-deductible plans are too costly for some consumers.

The Congressional Budget Office Suggests Causes for High Insurance Premiums

The Congressional Budget Office (CBO) recently published a proposal for commercial health insurance providers in an effort to reduce insurance premiums for policyholders. The CBO is attempting to address this issue, but some disagree with the basis of some of their proposals. For example, the CBO puts much of the responsibility for higher insurance provider costs on increasingly expensive hospital and physician services.

The American Hospital Association Argues They are Not Primary Contributors Toward High Premiums

But the American Hospital Association (AHA) argues that over the past decade, hospital price growth has increased at less than half the rate of insurance premium price growth. The AHA blames higher insurance premiums on saturated markets, among other things. The CBO also attributes rising insurance premiums to market power, as well as consumers’ and employers’ lack of sensitivity to prices.

Insurance Providers Know the Cause of Higher Premiums and Should Work Toward Lowering Costs

No one understands insurance provider business costs and premium costs better than the insurance providers. And no matter how justifiable premium increases are, the current rate of increase is unsustainable. Insurance providers will lose customers and capital when consumers can no longer afford premiums. Even if hospitals argue they’re not impacting insurance provider costs, there’s no doubt that lower hospital costs would enable insurance providers to lower premiums. The disparity between what Medicare and Medicaid pay for hospital and physician services and what commercial insurers pay is significant. For example, in some states, insurance providers pay double what Medicare pays for certain services.

So, insurance providers should work with hospitals to negotiate better and more fair rates. They should also work with politicians and Medicare service providers to push for increased funding so government-sponsored health insurance will pay a competitive rate for hospitals and physicians. Across the globe, countries have health insurance structures that differ from the U.S. While a complete overhaul of the system isn’t feasible, insurance providers would be wise to study efficient systems in other countries to implement some of their practices.