Three reasons for rising health insurance premiums

Tennessee marketplace consumers may experience some sticker shock when they try to sign up for health insurance plans during open enrollment this year. Carriers in the state have requested premium rate increases with the Tennessee Department of Commerce and Insurance, and the hikes are high.

BlueCross BlueShield, which has the majority of the Tennessee market, asked for the biggest average increase of 62 percent for 2017. This is on top of a 36 percent increase this year and a 19 percent increase last year. Cigna has requested an increase of 23 percent for its premiums, and Humana has filed for an average increase of 29 percent.

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Some consumers might not feel the full impact of the increases, however. As premium prices rise, so do the amounts of subsidies that more than 80 percent of marketplace enrollees are eligible for.

Even so, many consumers are likely wondering what the cause is behind these big jumps in price. Some even suggest it is proof that the Affordable Care Act is unsustainable. Here are three reasons prices keep rising.

1. Sicker sign-ups

In Tennessee, marketplace enrollees were a lot less healthy than insurers expected when they set their original rates in 2013. Covering their claims costs insurers a lot — so much that companies like BlueCross BlueShield lost millions of dollars in the first few years of the exchange. Raising the price of insurance is part of balancing how much it costs to insure these individuals.

Many people who use the marketplace to find coverage were previously uninsured. Before the Affordable Care Act, insurers were able to deny coverage to people with pre-existing conditions, which means if they didn’t have insurance at work, they weren’t able to find coverage at all. For example, an independent contractor with diabetes, or a part-time retail worker with pulmonary disease, might be denied coverage before the ACA.

A lot of people in that situation went without health insurance for many years, and their current state of health is not good. Many of these people are very expensive to cover now that they can get health insurance on the exchange.

2. Inflation of medical claims

Health insurance is used to pay for medical claims. Doctors and other providers submit claims to your insurer every time they perform a service for you, whether it’s a check-up, MRI or surgery. As the cost of performing those services gets more expensive, insurance has to get more expensive to cover it.

The prices of goods always rise as the economy grows, and health care is no exception. In fact, health care costs generally rise much faster than inflation. Specifically, health insurance costs in 2015 rose nearly 5 percent, according to the Bureau of Labor Statistics, while the economy as a whole grew just 2.4 percent.

3. Consumers are still learning

So why are health care costs rising so fast? That’s a tough question to answer succinctly. One reason is that patients are still learning how to act like consumers. Some people do not use healthcare responsibly or cost-effectively, and this raises prices for the whole system. These are people who go to the emergency room for non-emergencies, or people who do not receive preventive care in a timely manner.

The uninsured rate has an impact on this, too. Many people who do not have insurance cannot afford to manage their conditions, like asthma or diabetes. They might not visit the doctor for check-ups or be able to afford to buy their insulin. Then they wind up in the ER in a diabetic coma, which costs a lot more to treat. These are just individual examples, but they happen every day, and it adds up.

All of this culminates in pricey premiums for consumers. Without drastic change to how people use insurance and health care, prices are likely to keep rising.

Alex Tolbert is the founder of Bernard Health, a company that provides non-commissioned, expert advice on health, Medicare and COBRA insurance and medical bill consulting. To learn more, visitwww.bernardhealth.com.