According to the Wall Street Journal, these increases are due to:
- rising prescription-drug costs;
- medical inflation (~5.4% for 2014); and,
- Obamacare fees and coverage mandates.
Considering the law of supply and demand, those factors may not explain those increases.
In those 10 states where rate proposals have been filed, the insurers with the largest enrollments for 2014 offered the lowest or second-lowest health insurance prices. That pricing strategy proved effective in enticing people to enroll. Now having gained market share, those healthcare insurers are raising rates. It's the old retail sales "lead/loss" strategy. In the end, consumers will pay more to make up for what originally cost them less.
As the ancient Romans used to say, "Caveat emptor!" Or, more recently, as a salesman said to The Motley Monk, "Such a deal I have for you!"
The State of Oregon provides an object lesson:
- Moda Health Plan Inc. insured 75% of the healthcare plans sold on Oregon's exchange. For 2015, Moda wants a 12.5% premium increase. Its mid-range silver plan for a 40-year old would rise to $249/month.
- Oregon's Health CO-OP, which enrolled less than 1k Oregonians in 2014, is looking to cut its rates by 21%. It's mid-range silver plan for a 40-year old would cost $228/month.
The law of supply and demand would suggest that rising premiums will motivate healthcare consumers to switch plans, seeking cheaper rates for similar products, all other factors being equal.
So much for the lesson in basic economics. More interesting is the fact that the economy is exhibiting inflation and 5.4% alone for medical services. And that's to say nothing about all of those Obamacare fees and coverage mandates which add to the cost of a premium.
So much for "bending the cost curve down."
Let the discussion begin...
To read the Wall Street Journal article, click on the following link: