Welcome
ATTENTION: This is a beta website, the final version will look significantly different. Thanks for bearing with us while HJM is under construction! Posts can now be found here.
Close

Health inflation is now in insurance rather than health care

May 20, 2019

Topics: Quote of the Day

By Shelby Livingston
Modern Healthcare, May 17, 2019

The health insurance inflation rate hit a five-year peak in April, possibly because managed care is rising.

The Consumer Price Index for health insurance in April spiked 10.7% over the previous 12 months—the largest increase since at least April 2014, according to a Modern Healthcare analysis of the U.S. Bureau of Labor Statistics’ unadjusted monthly Consumer Price Index data.

In contrast, the other categories that make up the medical care services index—professional services and hospital and related services—rose 0.4% and 1.4% in April, respectively. The CPI for medical care services in April rose 2.3%, while overall inflation increased 2% year over year.

Because of the way the BLS calculates the health insurance index, the change year over year does not reflect premiums paid by customers, but “retained earnings” after paying out claims. These earnings are used to cover administrative costs or are kept as profit.

The likely reason health insurance inflation is rising is because of growth in managed care, including Medicare Advantage, Medicaid managed care and commercial insurance, according to Paul Hughes-Cromwick, an economist at Altarum. He noted that added administrative costs increase insurance price growth.

Hughes-Cromwick said the increase in the health insurance index could also be driven by the fact that insurers’ medical loss ratios may be decreasing as high premiums, particular in the individual health insurance exchanges, exceeded anticipated claims.

The eight largest publicly traded insurers posted net income of $9.3 billion in the first quarter of 2019, an increase of 29.9%. They made a combined $21.9 billion in profits over the course of 2018.

https://www.modernhealthcare.com…


Comment:

By Don McCanne, M.D.

For a dramatic representation of the point made in this article, click on the link and look at the graph depicting a very sharp rise in health insurance prices compared to prices for health care services. As the author explains, this does not reflect the premiums paid, but rather it reflects the retained earnings, i.e., administrative costs and profits.

This waste is what the single payer Medicare for All model is designed to get rid of. It looks like the insurers are making a run for egregious profits while they still can (even though they will have to pay rebates because they couldn’t hide all of their their excesses in the medical loss ratio).

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

About the Commentator, Don McCanne

Don McCanne is a retired family practitioner who dedicated the 2nd phase of his career to speaking and writing extensively on single payer and related issues. He served as Physicians for a National Health Program president in 2002 and 2003, then as Senior Health Policy Fellow. For two decades, Don wrote "Quote of the Day", a daily health policy update which inspired HJM.

See All Posts
18 views

You might also be interested in...

© Health Justice Monitor
Facebook Twitter