Capping Insurance Premiums Will Not Solve Rising Health Care Costs

Five years ago, if you didn’t receive health coverage through your employer or couldn’t qualify for Medi-Cal, finding affordable insurance could be difficult at best, and completely out of reach at worst. Many young, healthy people opted out of insurance altogether, and those most in need of medical care found it hard to get coverage at all.

Three years ago, the Affordable Care Act opened access to health care for millions — young, old, healthy, and sick — offering subsidies to make it affordable and ensuring everyone is guaranteed a comprehensive package of health benefits and preventive services.

Early implementation of California’s health exchange, robust competition and choice, and successful enrollment have helped keep premiums relatively stable. But premiums may still rise for some as the cost of health care goes up and we settle into a marketplace drastically different from just a few years ago.

Enrollment in individual insurance has grown by more than 50 percent since Covered California launched, providing comprehensive coverage to 2.3 million Californians. And 90 percent of Covered California consumers qualify for subsidies. With more Californians than ever using medical services, the cost of providing care has understandably increased.

For the first few years, the market saw very modest changes in premium prices. But when rate increases are a little higher, it’s important to understand the factors involved.

Not only are more Californians using medical services, but the costs of those services are becoming more and more expensive. The price of a hospital admission alone has risen 76 percent since 2004, and prescription drug spending is rising faster than any other sector of health care. Health plans are covering drug treatments that can cost as much as a house, and some drug companies have done everything they can to accelerate this budget-busting trend.

Ultimately, premiums reflect the cost of providing care to you. By law, health plans are required to spend a minimum of 80-85 percent of every premium dollar on medical care. The lion’s share of spending pays for prescription drugs, doctor visits, hospital bills, medical tests and treatments. In fact, the executive director of Covered California noted the health plan profit margin is less than 2 percent.

Existing laws ensure premium dollars go to medical care and require rate filings to be made public and reviewed by regulators, who provide important consumer protections. Subjectively capping insurance rates does nothing to address the underlying costs that drive up premiums, which is why both lawmakers and voters have overwhelmingly rejected proposals to arbitrarily regulate the price of health insurance.

To achieve truly affordable coverage and maintain a stable marketplace, we must have tough conversations about the factors driving health care costs. Some drugs provide lifesaving hope, but repeated price increases on decades-old medications and ever-higher launch prices for new treatments are driving up premiums. It is hard to have an informed debate about solutions when we have no information on what’s behind these price hikes.

With high enrollment and guaranteed access to coverage, it is time to shift our focus to the “affordable” part of the Affordable Care Act. That is the only way to protect consumers and taxpayers from rising health costs and ensure all Californians can maintain their coverage.

Charles Bacchi is president and CEO of the California Association of Health Plans, a trade group for the health insurance industry.

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