In response to Anthem Blue Cross of California’s requested premium increases of up to 39 percent for its individual policyholders, HHS Secretary Kathleen Sebelius released this report criticizing the practice and documenting rising individual premiums in other states.  The report notes that insurers in Connecticut, Maine, Michigan, Oregon, Rhode Island, and Washington also proposed similarly large premium increases for individual policies.  Though insurers argue that the premium hikes are designed to keep pace with rising medical costs and an aging enrollee pool, HHS notes that insurers’ premium increases are frequently 5 to 10 times larger than the health care expenditure growth rate.  The HHS report also notes that profits for WellPoint Inc., UnitedHealth Group Inc., Cigna Crop., Aetna Inc., and Humana Inc. grew ten times faster than inflation between 2000 and 2009.

From the report:

Our broken health insurance system has allowed these premium increases to occur. More than 94 percent of insurance markets in the United States are now highly concentrated. Without competition, insurers have no reason to drive costs down, and without additional choices in the marketplace, consumers have no choice but to continue to pay, or lose coverage.  As premiums go up in the current economic climate, more and more families are priced out of the market altogether, making a bad situation worse.

The “value gap” in the health insurance market is evident not just in overall premium hikes, but also in the use of those premium dollars.  Over the past decade, the amount private insurance companies spent on administrative costs grew faster than the amount spent on prescription drugs, a trend that is projected to continue through the next decade.  Three of the top five insurers cut the proportion of premiums they spent on customers’ medical care last year, committing more to salaries, administrative expenses, and profits.

Full report:  HHS Report Documents Rising Individual Health Plan Premiums (PDF | 472.21 KB)

US Department of Health and Human Services. (2010). Insurance companies prosper, families suffer: our broken health insurance system.