Why is the cost of health insurance rising?

While the Affordable Care Act managed to bring basic health insurance to 90 percent of Americans, that expansion has come with rising out-of-pocket costs. Higher deductibles and copayments mean that most Americans aren’t getting as much benefit from their monthly premiums, while premiums also continue to rise.“More people are insured, but in many ways people are not insured enough," Larry Levitt of the Kaiser Family Foundation told NPR. According to a recent study from the Kaiser Family Foundation, average deductible spending nearly tripled from 2004-2014. For people with employer-provided health coverage, deductibles rose from $303 to $1,077 between 2006 and 2015. Overall, the study found that deductibles rose about eight times faster than wages in the past 10 years.Understandably, rising cost-sharing is taking a toll on Americans with health insurance. A 2015 poll found that healthcare costs caused a “serious financial problem” for more than a quarter of surveyed adults. Forty-two percent said they had spent all or most of their personal savings on health costs, and 27 percent were now “unable to pay for basic necessities like food, heat or housing.”In addition to expanding insurance coverage, the Affordable Care Act (ACA) was designed to lower healthcare costs. So why are costs rising so dramatically?According to Kevin J. Counihan, the chief executive of the federal insurance marketplace, “pent-up demand for health care is greater than people expected.” People with pre-existing conditions are also now getting treatment, and it’s more expensive because they were shut out of the market for many years. An estimated 20 million Americans have gained health insurance as a direct result of the ACA. But since the federal health insurance marketplace opened in late 2013, the patients covered by the exchange have needed more expensive care than expected. As a result, major insurers have experienced rising costs, which are passed along through higher deductibles, copayments, and premiums. The ACA did establish a system that requires insurers planning to increase plan premiums by 10 percent or more submit their rates to either state or federal government for review. Actuaries are the people who crunch the numbers to establish insurance risks and premiums, and they base their estimates on historical experience. Kurt Wrobel, chief actuary for Geisinger Health Systems, told the New York Times that there was no historical data on which to base predicted costs for 2014. When the federal marketplace exchange opened in 2013, “Healthier people chose to keep their plans, so the collective cost of care for people buying insurance on the exchange was higher than expected.” Geisinger’s 2016 premium rate was too low, so like many companies they have requested an increase for 2017. But proposed rate increases are often reduced by federal officials, and subsidies will generally rise along with premiums. The Obama administration also emphasizes that consumers can always switch to cheaper plans next year.Antoinette Kraus is the director of a statewide consumer group, the Pennsylvania Health Access Network, which operates in Geisinger territory. She says that insurance companies expect newcomers to eventually become healthier, “so we won’t see these huge rate increases every year.”