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Health Care Premiums: Bend Over ‘n Brace Yourself

Posted by Larry Doyle on March 22, 2013 8:04 AM |

I guess we might soon expect Ben Bernanke and his pals at the Federal Reserve to discount the cost of health care from the core rate of inflation. I mean the cost of health care is not truly indicative of what it costs to run a family now, is it?

For those not aware, food and energy costs are not incorporated in determining the core rate of inflation. If the Fed discounted the costs of all goods and services, we might just be able to generate a report that reflects stable prices.

Pardon my sarcastic cynicism, but it is hard to restrain myself upon reading a lead story in this morning’s Wall Street Journal that should be entitled, Health Care Premiums: Bend Over ‘n Brace Yourself.  Let’s navigate as the WSJ writes . . .

Health insurers are privately warning brokers that premiums for many individuals and small businesses could increase sharply next year because of the health-care overhaul law, with the nation’s biggest firm projecting that rates could more than double for some consumers buying their own plans.

The projections, made in sessions with brokers and agents, provide some of the most concrete evidence yet of how much insurance companies might increase prices when major provisions of the law kick in next year—a subject of rigorous debate.

The projected increases are at odds with what the Obama Administration says consumers should be expecting overall in terms of cost. The Department of Health and Human Services says that the law will “make health-care coverage more affordable and accessible,” pointing to a 2009 analysis by the Congressional Budget Office that says average individual premiums, on an apples-to-apples basis, would be lower.

Right. Who do you believe? The warning shots coming across your bow from insurance agents follow up on the dramatic increases in health care costs over the last number of years as well.

Other carriers have also projected steep rate increases during private meetings and conversations with brokers. Brokers say they are being told to prepare the marketplace for small-business and individual rate increases as carriers get ready to file specific rate proposals and plan designs with regulators.

Insurers are “not being shy that premiums are going to increase in 2014,” and are urging brokers to “brace our clients,” said John Lacy, vice president of group benefits at Bouchard Insurance, a brokerage in Clearwater, Fla. His firm has been hearing from carrier representatives that individual premiums in Florida could go up 35% to 50%, on average, and small-business rates around 30%, though it hopes to find strategies to blunt the impact.

Do you want to take a local anesthetic, multiple epidurals, or get knocked out completely while you try to assimilate this news of expected dramatic increases in your health care premiums?

Although I would imagine neither the general anesthesia nor the epidurals are likely covered, so you may just want to bite down hard.

Feedback from the field is always appreciated.

Navigate accordingly.

Larry Doyle

Isn’t  it time or overtime to subscribe to all my work via e-mail, an RSS feed, on Twitter or Facebook.

I have no business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.


  • Larry,
    This is dead on. From all the insurance companies I represent they’ve all been saying 18-20% on the conservative end for next years increases once the individual mandate and preexisting conditions clauses go into effect and I’ve been forced to have this discussion with almost all my clients to prepare and plan for this added expense.


  • LD


    Thanks for your insights.

    Your site looks fabulous. Best of luck with your biz and all your other pursuits.

  • Ed

    When I was between jobs some years ago my family was thankfully at it’s healthiest. I dumped cobra and comparable comprehensive plans in favor of blue cross blue shield hospital insurance and “pay as you go” on everything else.

    The results were interesting, instead of spending $20k per year for 2 years, i spent $300 quarterly to bcbs and about $1500 per year on everything else.

    At the doctor, dentist and pharmacy i said “how much”? Often getting discounts for cash! And why not the cost savings to providers for not employing teams of people to process mandatory employer health plan “insurance”.

    This may have been the last time in out history this could be done, gradually i ran into providers who didn’t know what to charge! Really they didn’t know the price of their own product or service, they had to ask the manager or doctor.

    Someone’s grand vision of “helping people get affordable health care” through making insurance mandatory is moving us to a world where providers and consumers don’t know the price, so have no way of determining value, thus removing need for competition…

    I wonder what effect that might have on costs! You think they’ll go up? My suggestion is the intervention of government be removed freeing up the market place to competition, transparency and innovation.

    My last point is that making insurance mandatory makes people want more items to be covered from contact lens
    solution to viagra creating the worlds most expensive reimbursement system, i don’t think we want the insurance industry to do that for us, but they will for the mark up margin they can make.

    Insurance is a financial service provided by experts that have information that we don’t – it’s how long is the average amount of time is before we will want to fix or replace something and what the average cost might be.

    I’m convinced our government doesn’t know what insurance is. It should purely up to the individual if we want to buy this service.

    With technology more people can actually know more of this themselves! I guess i should be happy the government didn’t make horse and buggies mandatory, cause at a point in time they were helpful.

  • Small BD

    If our economy (people rather than corporate) were the Titanic, as it often feels, then ObamaCare is a massive titanium iceberg.

    I do not believe that accurate premiums can be projected (we’re approaching many uncharted, as well as distant waters). But I dread the probability of something a lot scarier than 50 – 100% premium increases: An extreme healthcare crisis is brewing (my ‘gut’ prediction is 2 – 5 years to reach the pandemonium stage).

    We simply lack the infrastructure and intelligence (political) to even attempt a major reform effort; even one that is more viable than ACA. We will learn that healthcare is not amenable to horse trading / lobbying, which is basically the way ACA was cobbled together. Against medical advice, I would say.

  • LD

    The secretary’s remarks are among the first direct statements from federal officials that people who have skimpy health plans right now could face higher premiums for plans that are more generous. She noted that the law requires plans to provide better benefits and treat all customers equally regardless of their medical claims.

    “These folks will be moving into a really fully insured product for the first time, and so there may be a higher cost associated with getting into that market,” she said. “But we feel pretty strongly that with subsidies available to a lot of that population that they are really going to see much better benefit for the money that they’re spending.”

    Ms. Sebelius added that those customers currently pay more for their health care if their plans have high out-of-pocket costs, high deductibles or exclude particular types of coverage, such as mental health treatment. She also said that some men and younger customers could see their rates increase while women and older customers could see their rates drop because the law restricts insurers’ ability to set rates based on age and gender.

    Don’t worry, folks, ObamaCare is blowing premiums through the roof, but there will be subsidies available for lower-income Americans! That means the rest of us will get screwed twice – once when we pay our higher insurance premiums, then again when we pay for all those lovely subsidies.

    On the political front, Obama’s cherished young voters are getting rooked, but luckily they tend to be low-information types who don’t hold him accountable for anything – they keep saying jobs and economic growth are their top concern, but they voted to re-elect him, didn’t they?

    Sebelius: Yep, Obamacare is Raising Insurance Costs

  • T.K.


    First time poster here. It seems that insurance companies are taking full advantage of the ACA to jack up their premium to justify the additional “essential health insurance benefits” that their new plans will be required to cover.

    At the same time we are talking about rising costs, Ms. Sebelius states that the individual will have more extensive coverage but fails to go into detail of how much the individual’s subsidies will cover their premium. I have a feeling if the subsidy only covers half the individual is not going to shell out money for coverage, they will just pay the fine come tax time.

    Also, I want to know why the politicians talking about the $8 billion ($11.3B in 2015) health insurance tax they are charging insurance companies? Doesn’t that seem counter-productive? Higher taxes but lower premiums, keep in mine the 85% Medical Loss Ratio they need to keep. I thought the ACA was all about cost containment, must have read the wrong political agenda….

    The health care industry can’t even predict what open enrollment is going to look like come October 1, 2013. Until then we will hear horror stories from brokers and insurance companies and politicians will be calling them liars. But deep down inside I know who the liar is in this situation.

  • Michelle

    I used to work at BCBS. Layoffs and outsourcing were massive because of the high costs of Obamacare. They said that they had to cut 30 million in operating costs per year to stay viable. That meant about half of the employees lost thier jobs to cut corners. They said they had to. They also stated in that in 2014 when everyone has to start paying for thier healthcare the young will be hit the hardest. They said they cannot charge sick and elderly higher rates therefore 18-24 year olds will be looking at paying about $1400 a month in insurance. How much do they think fast food pays?

    I have also recently read an article on a Pro-Obamacare site. It reassured the readers that sudbsities will make it affordable. They even provided a helpful link to the subsities calculator. Lets see I now receive $800 a month unemployment now… X 12 months for a family of 4…Grand total… It will only cost me $14,000 a year for insurance. I wouldn’t qualify for subsities according to this. Wait the math doesn’t add up. How can I pay $14K in costs while bringing in $10K a year? Great plan politicians works great.

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