Medical Costs Drive Colorado Insurance Prices

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4min 43sec

If you want to know how much profit your health insurance company is making off of you, the latest numbers are now available.This year’s report says the rising cost of medical care is the primary reason the price of health insurance keeps going up.
Colorado Public Radio Health Reporter Eric Whitney has a look at what's inside this year's report.

WHITNEY: Colorado is one of just a handful of states to publish a report on health insurance costs. Tom Abel with the state Division of Insurance says it's required by a law passed in 2008. Abel says the report is extensive.

ABEL: And it publishes information such as the expenses and profits, the reasons for cost increases, as far as cost shifting from employers to employees

WHITNEY: the report says the cost of health insurance in Colorado has been rising by 10% a year or more for the last several years. But it doesn’t offer any conclusions on why.

ABEL: It can't do that. There's just too many variables, to be quite truthful. 04-101

WHITNEY: Variables like how many people in Colorado are uninsured - that number affects the cost of insurance for people who do have coverage. Colorado insurance industry spokesman Jim Sugden says the most dramatic information in the report is that 10% fewer Coloradans got health insurance through small business than the year before.

SUGDEN: If I were looking really for a headline, it's that the small group business continues to shrink.

WHITNEY: A shrinking small group market could mean several things - That fewer small businesses could afford to offer health insurance, or that they just plain went out of business. It could mean that businesses told their employees to pick up a bigger share of the coverage, and more workers decided they couldn't afford coverage through their job anymore.

Some of the people who lost health benefits through work bought policies on their own in the individual market. The report says those policies are about twelve-hundred dollars a year cheaper than small group coverage. Sugden says there’s a reason for that

SUGDEN: you only get it if you're very healthy, small group coverage takes all comers.

WHITNEY: So, some number of people who lost coverage through work, and couldn't get individual plans, ended up on Medicaid. Because 2009 was such a tough year for the economy, the number of Coloradans on M
edicaid grew by 13%.Consumer advocate Dede de Percin says, for her, all the data in the report adds up to one key conclusion.

DE PERCIN: the biggest takeaway from the report, really, is that we really needed federal health reform. (laughs). In other words, the system is so clearly broken in multiple directions, and there's not one thing that's going to fix it, and that comprehensive reform at the national level was what we needed to try to address some of the key issues.

WHITNEY: The federal reform law passed last year, the Affordable Care Act, creates a lot of new rules for health insurers nationwide. For instance – individual health plans can no longer refuse to accept people who want to buy it. Some say that means insurance prices will go up. But de Percin is optimistic that other provisions in the act will drive prices down.

DE PERCIN: containing the cost of health care is going to be one of the keys to bringing down premiums, and the Affordable Care Act has many strategies to try to bend the cost curve, whether it's telemedicine and health information technology, to waste, fraud and abuse, all those pieces are in federal reform, it's going to take a while to roll out, but I think those get at some of the underlying costs that are going to be critical to make insurance affordable moving ahead.

WHITNEY: The Affordable Care Act now mandates to some extent how much profit health insurance companies can make – it doesn't dictate profits per se, but says insurers have to spend 80 to 85% of what they collect in premiums on medical care itself. They can take profits out of what's left over.
The state report says Colorado insurers are already pretty much in line with the medical spending requirement. It says the average profit among the state's top insurers was a little over 3% last year.

The report also notes that a majority of insurance policies in Colorado are held by just 4 companies. Industry representative Jim Sugden says that could change under the Affordable Care Act.

SUGDEN: we may have some pressure from consumers to say, we need more optoins. We've got 4 options, they're all priced about the same, they're all really expensive, what else can you find for us?

WHITNEY: Consumers can ask for more choices in the next couple of years. The federal law requires states to set up new health insurance marketplaces, or “exchanges.” The rules for those exchanges will have a lot to do with how many insurance options people have, and how much they'll cost.