By virtually all indications, insurance costs are rising – and if they haven't already, they're bound to do so in the days and months ahead. For businesses that provide employee benefits to workers through the health exchanges, the U.S. Department of Health and Human Services has given companies the green light to withhold a greater portion of employees' earnings for health care and nearly 75 percent of consumers say they're paying more on premiums today than they were when the year began.
The question many people have is what is the driving force behind the uptick? According to a recent study, it has everything to do with what it costs hospitals to treat patients, both in and outside of medical facilities. In short, because hospitals are spending more, those costs are being passed on to the people receiving treatment in the form of higher premiums and co-pays.
Both in the individual and group market, premium increases slated for 2016 have largely been directed by the growth in health care spending, based on newly released analysis conducted by health care consulting firm Avalere. Similarly, prescription drug spending has also trended higher, but the uptick thus far mirrors the increase in 2014, making it a less significant contributor.
Caroline Pearson, Avalere senior vice president, pointed out that what consumers pay is a function of what spending is like among health care providers, more specifically hospitals and medical facilities.
"Plans always focus on all of their input costs," Pearson explained. "Hospital and physician spending are the largest categories. The data on premium increases for 2016 do not indicate that prescription drugs are having an outsized impact on premiums."
Premiums up by more than $25 per month
In terms of concrete numbers, premiums for 2016 are expected to swell by an average of approximately $25.25 per month, Avalere Health reported. Of this total slightly more than 20 percent – $5.44 – stems from patient services that are performed away from hospitals, like homecare or elder adult care facilities.
Because of these added costs, health care experts point out that the Affordable Care Act's viability may be in jeopardy. When the ACA was signed into law, supporters said that it would cut premiums by more than $1,500 per year. Fairly consistently, however, insurance costs have risen almost across the board, including out-of-pocket limits, deductibles and co-pays, according to The Wall Street Journal.
This is true both for employer-provided based plans, as well as the individual market. A recent analysis of 34 state marketplaces, conducted by the WSJ, revealed that premium hikes for singles in 2016 were expected to be in double-digit territory in terms of percentages, assuming policyholders stay with the same plan they had last year.
80 percent receive federal subsidies
Perhaps the most compelling evidence of the high cost of ACA-based health care stems from how many people rely on subsidies. Of the 10 million people who get health insurance through HealthCare.gov, or a version of it made available through the exchanges, 8 in 10 are receiving financial assistance from the government, WSJ reported.
Premiums haven't merely risen, but considerably so, at least according to the people who are paying for coverage. Approximately three-quarters of adults in the U.S. say their premiums rose in the past year, according to Gallup poll. More specifically, 36 percent say their health care expenses have increased substantially. The remaining 38 percent said the uptick was more modest.
Cost-sharing is also more prevalent. For example, in 2001, nearly 25 percent of Americans were 100 percent covered through their employer, not having to contribute any of their earnings to coverage. That percentage has since dipped to 10 percent, Gallup reported from survey data.
