Health Insurance Companies Face New Regulations
May 2011
As the biggest
health insurance companies report a third year of record profits, they were greeted with some less-happy news this week. As of September 1st, insurance companies will have to justify rate increases of more than 10% for their medical coverage plans.
Rate hikes have received a lot of press lately. Many small businesses and individuals found their premiums for
medical coverage plans going up as much as 40% this year. In conjunction with the recession, the number of uninsured in America has jumped in the last two years, up to 50 million.
At the same time, health insurance companies posted a record year for profits this year, just as they did in the two years previous. As the New York Times says of the
health care situation in the US, a "lingering recessionary mind-set" and an inability to afford medical care in the first place has led many people to postpone treatments and/or skip medications. As a result health insurance companies spent less money on their customers, and were able to keep the difference.
The new law, enacted as part of the health care overhaul passed by the current administration, requires that health insurers defend any rate increase over 10%. This includes detailing why the rate increase is needed and where the money will be spent. The rate of medical inflation has been predicted at 9% for the coming year, meaning that the 10% increases allowed insurance companies should cover their costs for medical coverage plans.
Facts on:
Medical Coverage Plans
Did you know...
Some Americans saw rate hikes of up to 40% for their health coverage this year?
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It is important to note that the federal government does not have the right to block the rate hikes, though some states do. It is hoped that by forcing insurance companies to offer consumers greater transparency, unexplained and unnecessary rate hikes can be avoided.
Also, the new law does not apply to insurance policies purchased by big businesses. Only small business coverage and
individual health insurance plans will be monitored to keep the premium hikes at or below 10%.
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