A movement to include affordability in the Insurance Department’s review of health insurance premiums is gaining champions. That’s a good thing. The best care is useless if you can’t afford it. Holding insurers accountable for lowering costs is important, but it’s not going to solve everything. We need to do much more to get costs down. As the recent state briefing in Hartford on healthcare costs emphasized, it’s about input costs.
Health insurance premiums are rising far faster than household incomes in Connecticut, as in the rest of the country. Between 2008 and last year, Connecticut’s median household incomes averaged 1.9% increases annually, while single and family plan premiums in our state averaged 3.8% and 4.6% hikes annually, respectively.
And it’s not just squeezing family budgets, but also government and business spending. It’s displacing other important economic priorities like education, business investments, wage increases, and public health, which could bring down costs by preventing diseases.
No doubt, insurance companies are part of the problem. The most recent rate increase requests that averaged 20.4% don’t make sense. The companies have made significant profits over time, including in the dark COVID years. But it’s not all their fault. Under the Affordable Care Act, they are not able to spend over 15 or 20% on administration and profit. They have to work within a broad set of state and federal laws and rules including services that they must cover, such as free preventive services, and a good deal of transparency. (The Insurance Department’s annual Consumer Report Card on insurers’ performance is the best-kept secret in Connecticut healthcare.)
The big drivers of rising Connecticut healthcare costs are hospital and drug prices, and much of that is out of insurers’ control. Everyone understands that it’s not your gas station that is driving up the cost to fill your tank; their prices reflect their input costs. Russia’s invasion of Ukraine and OPEC cutting production are to blame.
Unfortunately, the state and, until recently, federal policymakers haven’t done a lot to help to lower drug or hospital costs. Over the last two years, the governor has proposed a tax on drug price increases that exceed inflation by 2% or more. Unfortunately, the language hasn’t passed into law. A bill that would have limited our state’s huge, monopoly health systems from charging unreasonable prices without any improvement in quality passed the Senate but died on the House calendar. In the absence of state government action, two lawsuits have been filed against Hartford Healthcare alleging anti-competitive behavior that jacks up prices and reduces consumer choice. The state’s regulatory process, Certificate of Need (CON), that is supposed to protect competitive markets and access to care is broken. From July 2016 through August 2021, out of 74 CON decisions, state regulators approved all but three.
On top of that, both state and federal law have well-intentioned requirements that, unfortunately, push prices up. Trying to streamline care, government and private payers have supported the consolidation of healthcare providers into integrated systems that concentrate market power. The Affordable Care Act includes important incentives for large, integrated health systems. The potential savings haven’t materialized, but the resulting monopolies are driving up prices. Recent birthing center closures in the state have resulted from hospital consolidations that were approved by state regulators.
Affordability reviews of insurance premiums is a good start, but alone it will do little to bring needed relief to consumers, businesses, and government budgets. Until policymakers unravel or mitigate the power of monopoly health systems and get serious about controlling drug costs, health insurance premiums will continue climbing into the stratosphere. As long as industries can point fingers elsewhere, everyone is confused, and policymakers are frozen. This will be hard, angering powerful state interests and lobbyists. But there are no silver bullets. It’s a complicated mess and it will take tough solutions to make a dent.