.

SmartMoney Blogs

Real-Time Advice
Our real-time advice on how market shifts and news impact you and your money

High Court Can’t Halt Rising Health Costs

However the Supreme Court’s rules on President Barack Obama’s sweeping health care legislation Thursday, experts say one outcome seems increasingly likely: insurance premiums will keep soaring.

The court is expected to determine the constitutionality of the Affordable Care Act, the reform law aimed at providing more Americans with health insurance. But if the Obamacare is upheld, even some supporters say it will significantly increase the cost of insurance as millions of new patients race to take advantage of medical resources. Even if it’s struck down, rates will still continue to rise because of dwindling competition in the health sector, says Kevin Flynn, president of Healthcare Advocates, an independent company that helps people find doctors, select nursing homes and solve insurance problems.

Experts on both sides of the political divide point to Massachusetts as a test run for such health care reform. The state introduced its own health care reform in 2006 which required residents to buy health insurance – similar to Obamacare’s “individual” mandate. But in the three years following the reform, premiums jumped 18% for a single plan, compared to 13% for the national average, according to a report by Consumer Watchdog. Family plan premiums rose nearly 20% in the state, versus 14.5% nationally, according to the report.

Chip Somodevilla / Getty Images

Many insurance pros and consumer advocates say those increases, which insurance companies enforced in order to establish higher rates for the influx of new customers, are likely to spread if the law is upheld. “It’s one of the few ways companies can claw back the massive costs of millions more people signing up for coverage,” says Alex Morozov, a senior health care analyst at Morningstar.

Even without Obamacare, health care workers and analysts say insurers face cost pressures. People are living longer and chronic obesity-related diseases like heart disease and diabetes are putting more financial strain on the system, says Rachel Wagner, a clinical dietician with the University of Cincinnati. Plus, experts say consolidation within the insurance industry in recent years means consumers have less choice when their insurer does decide to hike rates.

Premiums for employer-sponsored family health insurance plans jumped 50% from 2003 to 2010, and employees paid over 60% more toward their insurance, according to a Commonwealth Fund survey; the survey says health insurance costs outpaced income in every U.S. state over that period.

Some states are taking their own actions to keep premiums from rising. In 2010, Massachusetts and New York introduced legislation to approve and, in some cases, block changes in health-care premiums. Consumer Watchdog says this lowered the rate increases in Massachusetts to around 9% a year – although the state still has among the most expensive health-care premiums in the country. (A spokeswoman for the National Association of Healthcare Underwriters says costs and, therefore, premiums will continue to rise with or without the Affordable Care Act; but the spokeswoman says the reform would push up the costs for some consumers, particularly those who are younger and healthier.) “The regulation of premiums is the missing link in the Obama’s health care law,” says Carmen Balber, director of the non-profit Consumer Watchdog in Washington, D.C.

Some of those who support Obama’s Affordable Care Act agree, but say reform will give millions of Americans access to health care and help reduce the number of personal bankruptcies due to medical debt, says Wendell Potter, former vice-president of corporate communications at Cigna, one of the largest health insurance companies in the U.S. “Without reform, more people would have to pay out of their own pockets to see a doctor,” he says.

According to the U.S. private foundation Commonwealth Fund, underinsured adults – those with high medical expenses relative to their income – rose 80% from 2003 to 2010 to nearly 30 million people.

Also read:

Comments

We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (5 of 16)

View all Comments »
    • Part of the problem is that as soon as you enter a typical hospital in the US you are paying for those opulent leather couches and dozens of TVs, fancy ebony panels and tempered glass walls that add nothing to health care. They look like expensive hotels, not hospitals.

      As long as health care is a market commodity, not a fundamental right, nothing is going to change.

    • Am I the only one or does any one else wonder where all this money goes when health care rises? I work in a hospital and our care is as good or better than anyone elses in the area but it is no where near as good as it was 20 or 30 years ago and that’s obvious. There used to be more nurses more nurses aids Doctors spent more time with patients. Its kind of like banks it makes you wonder if someone or something is skimming. However the answer may just be Government involvement. Hospital receive payments from Insurance co. and the Government. And there’s one thing I’ve learned in my 60 years is that anything the government touches goes up in price. You have to support not only health care but all the beaurocrats running the system. Anyway it’s a damn shame for those who need care.

    • We HAVE given the free market a chance, in the form of the HMOs that rule health care. The system is broken as a result. It’s time to give national health insurance a chance. If we don’t do it voluntarily, we will be forced to it in the end. And to all those who think they can just live healthy and avoid incurring huge health bills, think again. Even otherwise healthy people can get cancer, or have an accident. Then the only thought in your wounded head will be, Save me, Somebody.

    • I consider rising healthcare costs the #1 problem in the US. Citizens will start revolting very soon. This cannot continue!

About Real-Time Advice

  • How breaking news — in the markets, Washington, and around the world — affects you and your money. Have a question about how current events may change your financial future? Email us at ask@smartmoney.com.

.