Health Care Reform causes Premiums to go up?

Ric Joyner, MBA, CEBS, GBA, CFCI

The Wall Street Journal is saying that insurers are adding cost to the health insurance renewal for health care reform measures. Meaning that assume the renewal was going to be 9% as the “normal” year to year rate increase. There are two sides of the story.  The insurers are adding 5-9% MORE for health care reform on top of the 9%. But why?

1. No underwriting and everyone is accepted regardless of health. That means no one can be rejected. Thus, we move from insurance (managing risk) to a utility organization that the government can dictate fees, pricing and now even profits. If the insurance company can’t underwrite the policy then they can’t prevent bad risk. Thus everyone that is healthy will pay for those that are unhealthy. Is this bad? Perhaps. It depends on your politics. If you believe that everyone should pay for everyone else then it works great. But think about it. Our founding fathers wanted true freedom to succeed or fail as an individual. We are taking the ability to succeed or fail away and we end up with mediocrity. And that is why your frame of reference will depend on which politics you believe in. Liberals lean toward bigger government and taxes so that “wealth is shared around”. If there anything wrong with this? Yes because in general (not in all respects) the government is a hindrance rather than a help and all over the world countries that have socialized medicine are finding that rationing is the norm.  Medicare is 20% of the federal budget! Conservatives on the other hand, believe in less taxes (keeping what you earn and spending it where you see fit), much less government and letting market forces dictate how health care will be delivered. Each has flaws because there are those in the middle that can get swept away.

2. If you read the article closely you will find the Obama Administration is saying that raising rates now is out of line it actually makes perfect sense. If you cover everyone, where you weren’t before…there are more costs and remember insurance carriers that are for profit manage risk. They are looking to the future not just one year out and frankly it is tough to know what the cost will be when you have to accept everyone. Thus companies will pass on the costs to the employers and the employers will pass on to employees and then on to customers.

3. So the Obama Administration knew that this was going to happen. When you extend coverage to everyone you also increase cost. Economists agree that when the health care bill was conceived and passed the costs of coverage for everyone will go up as well. This bill helps people access insurance but doesn’t address the issue of cost.

4. Raising premiums at this juncture in the economy is hard on the economy and prevents hiring. So with tax cuts ending in 11 for small businesses and families, no wonder that companies are not hiring and hoarding cash. Why the left doesn’t get this is beyond my comprehension.

5. Mandating insurance carriers to pay out 80% of claims will cause premium increases. Currently, carries make 4% or less. Forcing them to pay out claims causes them to increase premiums to compensate. 

This is important for you to recognize as we move forward with health care reform costs are going up and you need to plan.

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Posted in Random Thoughts | Tagged , , , | 3 Replies

About rjoyner

Ric Joyner, CEBS, GBA, CFCI Customer Experience Officer Ric is a founder of eflexgroup.com a national web based TPA for Cafeteria, HRA, HSA, Transit, VEBA and COBRA plans. eflexgroup is a leader in self-service employee benefit systems. eflexgroup was the first TPA in the industry to go “online” in 1999 allowing employees to self-serve 24 hours per day. He has lead the industry with eflex by placing provable customer service statistics, live, on eflexgroup.com Ric is celebrating his 32nd year employee benefits. He helped create TPAs such as TASC and Employee Benefits Corporation in Madison WI. He was a licensed insurance agent for 29 years. The designations Mr. Joyner holds are; Certified Employee Benefits Specialist, Group Benefit Associate, Certified Flexible Compensation Instructor, board approved by ASPA to teach Cafeteria Plan regulations. Ric also has a bachelors of science in Information Technology and MBA (emphasis is project management) and graduated summa cum laude from Capella University with a 4.0. Ric helped found the National Association of Professional Benefit Administrators (NAPBA.org). NAPBA is dedicated to training administrators in best practices and grass roots lobbying. Ric has served in the past as the Wisconsin Association of Health Underwriters State President in 2003. Ric is a frequent speaker and article writer for prestigious associations such as NAHU.org, NAPBA.org, Wisconsin SHRM, Austin SHRM, PACE.org, International Foundation of Employee Benefits, Tampa Bay AHU, WI AHU, Florida AHU, Florida NAIFA and participates on the List Serves (compliance programs for Consumer Driven Products of NAHU and International Foundation of Employee Benefits)

3 thoughts on “Health Care Reform causes Premiums to go up?

  1. Isaiah D. Joyner

    Agree with some points. The issue is not health care reform, it is the fiscal irresponsibility of this administration. I am a firm believer that all should have the care they deserve at graduated cost based on income. Healthcare for all to me translates into freedom for the U.S. people. Many who don’t have insurance or that cannot get the care they need, are lacking a basic quality of life that we all deserve. True some may not work for it, but the majority will in my opinion.

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  2. Isaiah D. Joyner

    There are many ways to fund healthcare and this administration is not finding any of those avenues to do so. They are creating more big government programs to create control. This is another issue that I wont go into, because it’s so plain to see the “big brother” mentality going on in this administration. Any good businessman or even a small child who’s taken basic math principles will understand that you cannot spend what you do not have. This basic principle is all but lost in this administration and is caused a near doubling of our deficit. This guarantees increased taxes for our children and most likely their children. This isn’t to say Bush didn’t have the same problem, he did! I wasn’t a fan of him either.

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  3. Isaiah D. Joyner

    How to fund healthcare: Reduce military, and programs that aren’t essential to protecting the U.S. Get rid of any and all government pension plans for government employees. E.g. the average congressman retires with 2 to 3 times more than the average private sector retiree. Make them save the way the average American would. Reduce salaries of government workers to the average medium income for that particular area. That alone would most likely put a huge dent in the health care or pay for it all!

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