Health Insurance Rates – What’s Up?
Guest Blog by Rob Cannon, Executive Vice President, Gorges & Company, Inc.
You have probably heard the news that health care premiums are increasing significantly in Maryland. Generally, premiums for group insurance in Maryland that apply to most nonprofit employers are going up, but the average increase is not in the double-digits like it is in the individual market.
Some of the primary reasons for increasing health care costs include:
- Health care benefits have increased over 72% since 2000
- Population is aging
- Rise in obesity and chronic illnesses due to poor eating choices and under-exercising
- Introduction of new treatments
- More diagnostic testing
- Defensive medicine
- Higher premium tax costs of regulatory medicine
- Ads for drugs that make us feel better but aren’t a necessity
What’s Happening in the Individual Market
In the individual market, evidence suggests that more and more healthy (and therefore less costly to insure) individuals forgo insurance coverage, leaving an insured pool increasingly comprised of older and sicker subscribers who are disproportionately more costly to insure. There is a law requiring people to have health insurance but the penalties are not high enough to motivate many healthy people to buy insurance. Some reports are saying individual insurance rates are going up by 20% or more for 2016 and 2017.
Prior to the ACA, people enrolling in the individual market were medically underwritten so the healthiest people were approved and the others denied. As a result, the rate in the individual market may have been $250 and the group rate almost $400 for the same person. Under the ACA, nobody is subject to medical underwriting which means that unhealthier people could pay less in the individual market. That segment is where the large increases are occurring because the lower rates are no longer supported by the enrollment. By next year, the disparity will be almost entirely gone.
What’s Happening with Employer-Based Plans?
Group insurance rates that are employer-based are experiencing single-digit increases in line with prior years, not the huge jumps that are reported in the individual market. Since 1994, employers in Maryland with fewer than 50 employees have been subject to Small Group Health Reform. This law accomplished many of the goals of the Affordable Care Act (ACA) such as not being subject to medical underwriting. No individual in an eligible group plan could be denied or charged a higher premium than a healthy person. Age of individuals in the group can be considered. Group rates in the small group market (under 50 employees) generally have had single-digit increases for the last couple years and that is what is projected for 2017 rates.
Organizations with more than 50 employees are subject to medical underwriting in setting health insurance rates. This is why Maryland Nonprofits is now offering its members the Vital Health program that may provide lower premiums for larger organizations.
Gorges and Company
been a trusted partner with Maryland Nonprofits for over a decade. We provide free quotes on health insurance for organizations of any size and will apply all discounts available to you as a Maryland Nonprofits member. Feel free to contact me anytime at 410-561-8280 or firstname.lastname@example.org
Executive Vice President
Gorges & Company, Inc.
2345 York Road
Timonium, MD 21093