Health Insurance Rate Increases: A Regulatory Tsunami!

4. Added Benefits In ACA
5. New Taxes On Healthcare and Insurance Companies
6. MLR Risk Management, and lastly…
7. Medicaid Reimbursement Cost-Shifting

The last piece of the puzzle involves the cost-shifting effects of Medicaid and the ACA, and potentially explains the largest part of the increases Californians are seeing.

In December, the 9th Circuit Court of Appeals allowed Governor Brown to cut reimbursements in California’s Medi-Cal (California’s version of Medicaid) program. The 10% cut in reimbursements to doctors and hospitals, means that providers who continue to service public Medi-Cal patients will attempt to make up those lost revenues through “other avenues.” The other avenues are private health insurance plans.

Medi-Cal rate cuts hurt health care, access

The cost shifting whereby private pay or insured patients are asked to subsidize public insurance plans that don’t cover the actual costs of care will only accelerate, raising insurance premiums and costs to paying patients.
From the San Diego Union Tribune

California health insurance companies know these Medi-Cal providers are going to push to recoup their Medi-Cal losses when renegotiating their contracted rates throughout 2013. So the insurance companies would be wise to factor this into the rates now to compensate for the higher costs they will face from Medi-Cal providers.

The state of California, and Governor Brown, has been very short-sighted about cutting the Medi-Cal reimbursement rates in an attempt to balance the budget. The Medi-Cal program already had the lowest reimbursement rates of all 50 states. Experts predict these additional rate cuts will actually increase costs for the state, by reducing the availability of doctors that treat Medi-Cal patients, and therefore causing some patients to postpone care, or go to a hospital emergency room where the cost of treatment is significantly higher. Medi-Cal doctor availability will already be strained in 2013 as California shifts 800,000 children from the Healthy Families program into the Medi-Cal system. In 2014, when Obamacare starts, the state expects another 2 to 3 million people to enroll in Medi-Cal.

So there you have it, the seven main cost drivers that are causing insurers to increase health insurance rates. Based upon rate increase documents submitted to the California Department of Insurance two to three months ago, Anthem Blue Cross has an average increase of about 25%, Aetna is increasing rates almost 19%, and Blue Shield of California is raising rates by approximately 12%, and Health Net raised rates on its HMO plans by an average of 18%.

Health Insurance Rate Increases – What Can You Do To Reduce Your Costs?

Once the shock of receiving the rate increase letter wears off, there are a couple of steps you can take to quickly find out if there are better alternatives for you. The simplest step is to call the insurance company and ask about transferring to a lower cost plan offered by that insurance company. As long as you are not already in the lowest cost plan, there might be an alternative that could work.

The other option is to contact a health insurance broker and get a set of quotes showing all the plans from each insurance company, and recommendations from the broker regarding which plans match the benefit levels you want. At SPF Insurance we have been getting phone calls from new customers since late November. Watch the following video to see what’s happening in California and what solutions we have been recommending.

In most situations, Health Net has plans that are a good fit and at much lower prices than the other insurance companies. In selected cases, the Open Access Value 5000/100% plan from Cigna seems to be the preferred solution. In either case, the best way to determine what choices you have, is to call us and let us guide you to a plan that fits your needs at a reasonable price for you.

So don’t fret about the health insurance rate increases that are happening in 2013. There are alternatives, and there are advisors that will help you make the transition to a more affordable plan. Health Care Reform is not about reducing the cost of health insurance. If it were, then we wouldn’t see the increases we currently face. The Affordable Care Act is about regulating health insurance, and that means turning loose the full power of the “Law Of Unintended Consequences”. Welcome to government regulation!