Healthcare’s rising costs

Even a slow economy can’t stop healthcare costs from rising. A new report by the Kaiser Family Foundation and the Health Research & Educational Trust shows that the cost of employer-provided insurance rose 9% this year — even as workers and their families were cutting back on trips to the doctor’s office — and has more than doubled over the last decade. The data buttress the arguments in favor of AB 52, a California bill that would give state regulators the authority to reject unreasonable increases in health insurance premiums. But they also show that policymakers must do even more to slow the growth of healthcare costs.

The report was based on interviews with more than 2,000 employers between January and May. Researchers found that premiums rose three times faster from 2010 to 2011 than they had the previous year, pushing the average cost of policies for single workers to $5,429 and for families to $15,073. Researchers also found that workers were moving in greater numbers into plans with high deductibles but lower premiums, reflecting efforts by employers and workers alike to rein in spending.

The increase in premiums again outpaced the growth in the demand for care and the cost of treatment, which have been slowed by the economic downturn. In fact, according to an analysis by the Segal Group, insurers and health plan administrators significantly overestimated how much they would have to pay doctors and hospitals. Drew Altman, chief executive of the Kaiser Family Foundation, suggested that these overestimates contributed to the surge in premiums.

AB 52 would enable state regulators to examine insurers’ cost projections and, if they’re excessive, reject any proposed premium increases. That added protection for consumers will be crucial once the federal healthcare reform law’s requirement that all adult Americans carry insurance takes effect in 2014. The bill stalled in the state Senate late in this year’s session, and lawmakers should get it back on track when they return to Sacramento.

As helpful as AB 52 would be, however, it’s only a partial answer to the problem. The cost of medical treatments and prescription drugs continues to escalate faster than inflation. Meanwhile, federal and state budget cuts are shifting a growing share of the cost of treating Medicare and MediCal patients onto people with private insurance, and federal mandates to cover more young adults and provide free preventive care are adding to the upward pressure on premiums. The healthcare reform law should help slow the growth of medical expenses in the long term by improving how healthcare is delivered and paid for. Nevertheless, as the Kaiser report demonstrates, Americans can’t afford to wait long for relief.