Chat Replay: Why Do Insurance Premiums Continue To Rise?

Our first discussion about why health insurance premiums continue to rise brought up some interesting questions (read the chat replay). So we are delving into the subject deeper. Panelists Robert Zirkelbach, spokesperson for America's Health Insurance Plans, and Mary Ellen Breault, director of the Life and Health Division at the Connecticut Insurance Department, will be on hand to answer questions in a live chat at noon on Thursday, Dec. 9.

Much of the public debate about healthcare has focused on the rising price of health insurance. Insurers have consistently said that the reason premiums keep going up is because of increasing cost of medical expenses as well as rising utilization -- people using services. However, consumers have pointed to health insurance profits and executives' pay to as evidence that higher premiums are helping the health insurers' bottom line. So, what is involved in setting premiums and why do they keep going up?



 HealthKey Chat: Why Do Insurance Premiums Continue To Rise?(12/09/2010) 
11:20
Courant.com: 
Welcome to today's live chat! We'll get started at noon, but you can send in your questions and comments at any time.
Thursday December 9, 2010 11:20 Courant.com
11:47
Robert Zirkelbach, AHIP Press Secretary: 
Hello
Thursday December 9, 2010 11:47 Robert Zirkelbach, AHIP Press Secretary
11:49
Mary Ellen Breault CID: 
Hello, I have logged in as well.
Thursday December 9, 2010 11:49 Mary Ellen Breault CID
11:50
Matthew Sturdevant: 
Thank, and welcome Robert and Mary Ellen.
Thursday December 9, 2010 11:50 Matthew Sturdevant
11:51
Matthew Sturdevant: 
Oops. A mistake already. Thank you, Mary Ellen and Robert. I will start the chat off in a few minutes with a question. As you know, we are going to be talking about health insurance premiums and what are the drivers in pricing.
Thursday December 9, 2010 11:51 Matthew Sturdevant
11:53
Do you agree with the way healthcare is managed and priced in America?
Yes
 ( 33% )
No
 ( 33% )
It could be improved.
 ( 33% )
Federal reform is helping to fix it.
 ( 0% )
It needs to be overhauled completely.
 ( 0% )

Thursday December 9, 2010 11:53 
11:56
Matthew Sturdevant: 
First off, thank you again for taking the time to join us. I'd like to start the conversation by asking a general question to you, Robert, about health premiums. Why are the increasing -- is it that people are using more medical services today than in the past? Is it that those medical services are more costly ?
Thursday December 9, 2010 11:56 Matthew Sturdevant
11:59
Robert Zirkelbach, AHIP Press Secretary: 
Thanks for giving me the opportunity to join the chat today.

Premiums are increasing because of skyrocketing medical costs, the impact of younger and healthier people dropping their insurance during the recession, and requirements in the new health care reform law that families and small businesses buy more health care coverage than they currently have.

In fact, we just released a new report today showing that hospital prices are soaring in California and Oregon - by more than 50 percent for many services.

This needs to be a part of the discussion about premium rates.
Thursday December 9, 2010 11:59 Robert Zirkelbach, AHIP Press Secretary
12:02
Matthew Sturdevant: 
We hear about the negotiations that health insurers have with hospitals and with doctors. Doctors say their reimbursement rates have been flat for years. What exactly are these medical costs that are rising?
Thursday December 9, 2010 12:02 Matthew Sturdevant
12:03
Matthew Sturdevant: 
And a question for Mary Ellen: when health insurers submit proposed rates, what is it in those filings that the Connecticut Insurance Department sees as worthy reasons to allow an increase?
Thursday December 9, 2010 12:03 Matthew Sturdevant
12:06
Robert Zirkelbach, AHIP Press Secretary: 
As these negotiations are going on, our members are get rate increase requests from hospitals in some parts of the country by as much as 60 percent. That's just for one year.

There have also been a number of reports recently showing that increasing hospital consolidation is leading to higher prices for services.
Thursday December 9, 2010 12:06 Robert Zirkelbach, AHIP Press Secretary
12:07
Robert Zirkelbach, AHIP Press Secretary: 
The bottom line is that premiums follow underlying medical costs. In order to make health care coverage more affordable for families and employers, there needs to be a much greater focus on medical costs.
Thursday December 9, 2010 12:07 Robert Zirkelbach, AHIP Press Secretary
12:07
Mary Ellen Breault CID: 
The Department actuary reviews the historical experience for the products that are subject to the filing as well as the trend projection and other assumptions used in the pricing. Trend includes the change in the cost of medical services, the utilization of services including any change in the types of services (for example from less costly to more costly services or prescription drugs), changes in medical technology.
Thursday December 9, 2010 12:07 Mary Ellen Breault CID
12:07
Matthew Sturdevant: 
Robert -- is it that the hospitals are getting more expensive machines, or that the testing has become more advanced and therefore costs money? Both? Is testing more frequent?
Thursday December 9, 2010 12:07 Matthew Sturdevant
12:10
Matthew Sturdevant: 
Mary Ellen -- historical experience: is that the price the insurer actually paid in claims for doctor visits, lab work, MRI testing, x-rays, surgeries and all other manner of claims?

And how does historical experience influence trend -- is that very subjective? Is it something akin to a shop keeper saying, "Well we are paying an average of 5 percent more for the merchandise, therefore next year we should price our service at 6 percent to make sure we can get a profit?"
Thursday December 9, 2010 12:10 Matthew Sturdevant
12:11
Which of your insurance policies have gone up more in price?
health insurance
 ( 50% )
auto insurance
 ( 0% )
homeowner's insurance
 ( 0% )
long-term care
 ( 0% )
life insurance
 ( 50% )

Thursday December 9, 2010 12:11 
12:12
Robert Zirkelbach, AHIP Press Secretary: 
Good question. There are a number of drivers of higher prices. Provider consolidation is one. Other factors include increased utilization and the development of new drugs and technologies with very little evidence about their effectiveness.

And yes, testing has increased, particularly with high-tech imaging services such as MRIs and CT scans. Doctors feel like they are forced to prescribe extra tests to protect themselves against lawsuit because we have an out of control medical liability system.
Thursday December 9, 2010 12:12 Robert Zirkelbach, AHIP Press Secretary
12:14
Mary Ellen Breault CID: 
Yes, the historical experience is the actual claims incurred for all medical services covered under the contract. Historical experience is used as the starting point in the trend analysis. This analsyis is not a subjective process and is generally done for a number of years looking at changes in claims costs from one period to another.
Thursday December 9, 2010 12:14 Mary Ellen Breault CID
12:14
[Comment From MLML: ] 
Is it normal that I spend more in premiums nearly every year than I use in medical care? This year, I will spend about seven to eight times as much as I used.
Thursday December 9, 2010 12:14 ML
12:17
Mary Ellen Breault CID: 
Premium rates are based on an insurance company's total book of business. An individual's premium cannot be increased on the basis of that individual's claims experience. Insurance is the pooling of risk, and it may be the case that someone fortunate not to have to utilize medical services may pay more in premium than use in claims.
Thursday December 9, 2010 12:17 Mary Ellen Breault CID
12:17
Matthew Sturdevant: 
Mary Ellen -- are you able to elaborate on how historical experience relates to the trends. Is this essentially saying that if an insurer has paid 8 percent more in claims in 2010 than in 2009, then they may charge 8 percent more in 2011 than at the start of 2010?
Thursday December 9, 2010 12:17 Matthew Sturdevant
12:17
Robert Zirkelbach, AHIP Press Secretary: 
Yes, the way health insurance works is that people pay into the system when they are healthy and when they are sick. Your premiums help cover the cost of people with high medical costs this year and if you have very high medical bills in a future year other people's premiums will help cover your costs.
Thursday December 9, 2010 12:17 Robert Zirkelbach, AHIP Press Secretary
12:19
Robert Zirkelbach, AHIP Press Secretary: 
Here is the new report on hospital prices that we released today: http://bit.ly/hN0SGE
Thursday December 9, 2010 12:19 Robert Zirkelbach, AHIP Press Secretary
12:19
Matthew Sturdevant: 
Robert, I have heard of health insurers working with doctors and clinics to implement "accountable care organizations." What are those and how do they work?
Thursday December 9, 2010 12:19 Matthew Sturdevant
12:24
Mary Ellen Breault CID: 
The calculation of trend is not quite as simple as your example. Adjustments may need to be made to reflect such things as changes in membership. In addition, other assumptions need to be reviewed before a rate increase is granted. For example, if a carrier knows there has been a significant change in negotiated rates with providers, that must be reflected as well.
Thursday December 9, 2010 12:24 Mary Ellen Breault CID
12:24
Robert Zirkelbach, AHIP Press Secretary: 
Accountable Care Organizations come out of the new health care reform law. The goal is to create a system of shared accountability to give doctors and hospitals a greater incentive to manage a patients health care.

We are still waiting on regulations from HHS so we don't know exactly what they will look like.

But there is widespread agreement that we need to do much more across the health care system to coordinate care and manage treatment for patients with chronic conditions. We also need to move away from the current fee-for-service system where provider are reimbursed for the number of services they provide and instead move to a system that rewards providers for improving value and quality. ACOs are a step in that direction.

Health plans have actually been working with providers and these types of initiatives for many years. You can learn more by visiting www.ahip.org/value.
Thursday December 9, 2010 12:24 Robert Zirkelbach, AHIP Press Secretary
12:27
Matthew Sturdevant: 
Mary Ellen -- I think the general public has heard a lot about the assumptions in actuarial science, and how different assumptions can lead to different price conclusions.

What are those assumptions? Assumptions of what -- that membership will decline? That a hospital will hold out in negotiating much its reimbursement rates?

And how much latitude is there in those assumptions?
Thursday December 9, 2010 12:27 Matthew Sturdevant
12:28
Matthew Sturdevant: 
My apologies, Mary Ellen, in the second paragraph I meant: That hospitals will hold out when negotiating reimbursement rates with insurers?
Thursday December 9, 2010 12:28 Matthew Sturdevant
12:29
Matthew Sturdevant: 
Robert -- In the accountable care system, it seems the insurer would provide an incentive to doctors to hold down medical costs. Would that mean that doctors could refrain from treatment -- or choose a less costly treatment in order to achieve the financial award from the insurer?
Thursday December 9, 2010 12:29 Matthew Sturdevant
12:33
Mary Ellen Breault CID: 
Actuarial science is the process of taking past claims data and other known information such as changes in membership or contracting and projecting it for the rating period. Changes in the claims data can reflect the increase in medical costs, changes in the medical services used, changes in medical technologies. The actuarial review tests the soundness of these assumptions.
Thursday December 9, 2010 12:33 Mary Ellen Breault CID
12:36
Robert Zirkelbach, AHIP Press Secretary: 
Here is the letter we recently submitted to HHS on ACOs: http://www.ahip.org/content/default.aspx?docid=32215

The focus on ACOs is not to limit care, but rather to improve the quality and safety of the care that patients receive. It is to ensure that patients are getting the right health care at the right place and at the right time.

Let me give you an example. We have a readmissions crisis in this country. Patients that are discharged from the hospital end up being re-admitted unnecessarily at very alarming rates. What we are finding is that patients are not getting appropriate follow up care (visit to their primary care doctor or taking their medicines) and that is causing complications that bring them right back to the hospital. In a fee-for-service system hospitals don't have any incentive to prevent that. This needs to change.

Health plans have developed innovative programs that are helping patients the moment they are discharged to help ensure they are getting the follow up care they need. These programs are having tremendous success. Check out this report: http://www.ahipresearch.org/pdfs/AHRQ_revisit_readmission_rates_10-12-10.pdf

This is exactly the type of thing we need to replicate across our health care system. Hopefully ACOs can help.
Thursday December 9, 2010 12:36 Robert Zirkelbach, AHIP Press Secretary
12:37
Matthew Sturdevant: 
Mary Ellen -- some states require that a rate increase is "not excessive" while other states say the rate should be "reasonable." These are legal terms, though obviously subjective. Is there any guideline from the National Association of Insurance Commissioner or the U.S. Department of Health and Human Services regarding what is deemed "excessive" or "reasonable"?

If not, how does the Connecticut Insurance Department decide if a rate is excessive or not?
Thursday December 9, 2010 12:37 Matthew Sturdevant
12:40
Mary Ellen Breault CID: 
CT requires that rates be adequate, not excessive and not unfairly discriminatory. An actuarial standard is that rates must be reasonable in relation to the benefits provided. The NAIC does not have any guidance, but HHS will be coming out with a regulation defining what is "unreasonable."
Thursday December 9, 2010 12:40 Mary Ellen Breault CID
12:41
Matthew Sturdevant: 
Robert -- doctors are concerned that if and when Medicare reimbursement rates are lowered, the price that private health insurers pay to reimburse doctors and hospitals will also decline. As I understand it, health insurers base their reimbursement rates on a percentage of Medicare's rate.

Example: Insurer X will pay Hospital Y 200 percent of the Medicare rate for a colonoscopy.

Will the private insurers' rates decrease with Medicare rates? Is this part of "bending the cost curve?"

Thursday December 9, 2010 12:41 Matthew Sturdevant
12:44
Robert Zirkelbach, AHIP Press Secretary: 
No, actually the opposite is happening. When providers receive less money from Medicare and Medicaid they just pass those costs along to people with private coverage. It's called cost-shifting and it's a major problem. A study was released a while back which found that an average family of four was paying $1,500 in higher premiums as a result of underpayments to providers from Medicare and Medicaid.
Thursday December 9, 2010 12:44 Robert Zirkelbach, AHIP Press Secretary
12:46
Matthew Sturdevant: 
Mary Ellen -- in other definitions provided by the federal Health and Human Services, do they provide exact numbers, or is it additional language -- such as "reasonable" and "not excessive?"
Thursday December 9, 2010 12:46 Matthew Sturdevant
12:47
Mary Ellen Breault CID: 
HHS has not provided any guidance as yet. The NAIC recently stated that regulations may be coming in the next few weeks.
Thursday December 9, 2010 12:47 Mary Ellen Breault CID
12:50
Mary Ellen Breault CID: 
Premium rates for any individual cannot be increased on the basis of the individual's health condition. Rate increases are approved when the insurance company can demonstrate that the overall claims for the book of business are increasing.
Thursday December 9, 2010 12:50 Mary Ellen Breault CID
12:50
Robert Zirkelbach, AHIP Press Secretary: 
I know this question was not directed at me, but I thought I would add a few comments. The important thing is to ensure that there is an objective process based on actuarial data that takes into account all of the different factors contributing to premium increases. An arbitrary and subjective process can easily become politicized as we have seen in several states. If that happens - and premiums are arbitrarily capped while medical costs continue to soar - that will destabilize the market and put at risk the coverage the families and employers rely on.
Thursday December 9, 2010 12:50 Robert Zirkelbach, AHIP Press Secretary
12:50
Matthew Sturdevant: 
Robert -- you bring up an excellent point. If the cost shifting is happening, and if many more people have access to under-funded government plans, what do you expect the outcome will be?

Will people with private insurers subsidize the lower rates paid by government health plans -- as you suggested with the cost shift?

How do you expect this to play out with the requirements of federal reform?

Thursday December 9, 2010 12:50 Matthew Sturdevant
12:53
Matthew Sturdevant: 
Mary Ellen -- people may not be aware of which health plans are subject to regulation by the Connecticut Insurance Department.

For example, companies that have a lot of employees and robust revenues may decide to be self-insured. They use a private insurance company to administer the plan, but the company itself is paying claims. That is an example of a policy not regulated by your department, right?

What are examples of plans that are regulated by the department and plans not regulated by the department?
Thursday December 9, 2010 12:53 Matthew Sturdevant
12:53
Robert Zirkelbach, AHIP Press Secretary: 
Yes, there is a very real concern that increased enrollment in public programs will increase the cost-shifting to the public sector. It's just like a balloon. When one side gets pushed down it just gets larger on the other side.
Thursday December 9, 2010 12:53 Robert Zirkelbach, AHIP Press Secretary
12:56
Matthew Sturdevant: 
Robert, many people see their health insurance policies increase at the same time that health insurers are having great stock performance. Health insurers have seen strong profit margins and their top executives are paid in the millions of dollars. This point is regularly mentioned by consumer advocates.

Should there be a "reasonable" or "not excessive" application to executive pay?

What do you say about the profits and executive pay?
Thursday December 9, 2010 12:56 Matthew Sturdevant
12:56
Mary Ellen Breault CID: 
The Insuance Department has authority over all individual health insurance rates. Most group rates are not required to be filed with the exception of group rates for HMOs. You are correct that some employers may choose to self-insure. The Department has no authority over these plans as they are under the authority of the federal Department of Labor in accordance with ERISA.
Thursday December 9, 2010 12:56 Mary Ellen Breault CID
12:56
[Comment From buddybuddy: ] 
What conditions are likely to make my health insurance rise the fastest?
Thursday December 9, 2010 12:56 buddy
12:58
Matthew Sturdevant: 
We have three minutes left. I see many people watching the discussion, though they are not asking questions. Time is running out. Please ask a question if you have one.
Thursday December 9, 2010 12:58 Matthew Sturdevant
12:58
Mary Ellen Breault CID: 
Buddy, See my response given at 12:50.
Thursday December 9, 2010 12:58 Mary Ellen Breault CID
1:00
Matthew Sturdevant: 
Seeing no further questions, I want to thank you Mary Ellen and Robert for joining the chat today. I appreciate your taking the time.
Thursday December 9, 2010 1:00 Matthew Sturdevant
1:00
Mary Ellen Breault CID: 
My pleasure.
Thursday December 9, 2010 1:00 Mary Ellen Breault CID
1:01
Robert Zirkelbach, AHIP Press Secretary: 
I'm glad you brought up the issue of profits. There is a lot of misinformation out there about profits in the health insurance industry.

The data is clear that profits are not what is driving up health care costs. For every dollar spent on health care in America, less than one penny goes towards health plan profits.

Right now, according to Yahoo Finance (http://biz.yahoo.com/p/5qpmd.html), health plans are 13th out of 16 health care industries. Last year, one pharmaceutical company had more profits than the entire health insurance industry combined.
Thursday December 9, 2010 1:01 Robert Zirkelbach, AHIP Press Secretary
1:01
Matthew Sturdevant: 
Thank you everyone who logged in to watch the discussion and to those who asked questions. A transcript of this chat will be on Courant.com in the days and weeks to come.

Thank you again Robert and Mary Ellen.
Thursday December 9, 2010 1:01 Matthew Sturdevant
1:01
Robert Zirkelbach, AHIP Press Secretary: 
Thanks for hosting this web chat. Appreciate the opportunity to participate.
Thursday December 9, 2010 1:01 Robert Zirkelbach, AHIP Press Secretary
1:01
 

 
 
 
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