Saturday, May 14, 2011

Making Out Like Bandits

The economy may still stink for most of us, but there are some companies which are doing just fine. It's not just the oil companies which are raking in record profits. So are health insurers.

The nation’s major health insurers are barreling into a third year of record profits, enriched in recent months by a lingering recessionary mind-set among Americans who are postponing or forgoing medical care. ...

Yet the companies continue to press for higher premiums, even though their reserve coffers are flush with profits and shareholders have been rewarded with new dividends. Many defend proposed double-digit increases in the rates they charge, citing a need for protection against any sudden uptick in demand once people have more money to spend on their health, as well as the rising price of care.

Now reserves, the money insurers set aside in separate account to cover losses, are generally set on the basis of predicted future events, and health care costs continue to rise, so there is good reason for those reserves being quite cushy right now. That doesn't quite explain the drive for higher premiums right now, however, especially given the string of extremely profitable years for the companies.

So what's going on?

Well, as to those profits: many policy holders are themselves rationing health care. Those who are working at jobs where insurance is offered now find that their employers have had to go to policies with higher deductibles and co-pays. That means more money comes out of the policy holder's pocket, and with rising gasoline and food costs, people are just foregoing doctor visits for "minor" issues like preventive care. Insurance companies claim that as the economy picks up, so will visits to the doctor.

Those companies also have to be contemplating the implementation of the new healthcare law, when they won't be able to turn away anyone for any reason. Insurers got away with raising premiums when early provisions kicked in, and they figure they should be able to do it again.

Some observers wonder if the insurers are simply raising premiums in advance of the full force of the health care law in 2014. The insurers’ recent prosperity — big insurance companies have reported first-quarter earnings that beat analysts expectations by an average of 30 percent — may make it difficult for anyone, politicians and industry executives alike, to argue that the industry has been hurt by the federal health care law. Insurers were able to raise premiums to cover the cost of the law’s early provisions, like insuring adult children up to age 26, and federal and state regulators have largely proved to be accommodating.

It's time now for federal and state regulators to stop being so accommodating. Proposed premium hikes should be fought hard unless the insurers stop being so outrageously profitable.

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