Due to the way in which the BLS calculates the health insurance index, the change compared to the previous year does not reflect the premiums paid by the customers, but the “retained earnings” after the claims have been paid out. These revenues are used to cover administrative costs or are kept as profit.
The BLS distributes the benefits paid out in the health insurance index to other uninsured medical care categories, such as B. Medical Services.
According to Paul Hughes-Cromwick, an economist at Altarum, the likely reason behind the rise in health insurance inflation is growth in managed care, including Medicare Advantage, Medicaid managed care, and commercial insurance. He found that additional administrative costs increase insurance price growth.
Hughes-Cromwick said the rise in the health insurance index could also be due to insurers’ claims rates falling as high premiums, particularly on individual health insurance exchanges, exceeded expected claims.
The medical claims ratio reflects the percentage of each premium dollar that is spent on medical claims and quality improvements. Insurers must pay at least 80% of the premiums for these things. If not, they must provide discounts to plan members under the Affordable Care Act.
In response to rising inflation, a spokeswoman for US Health Insurance Plans, the largest lobbying group in the industry, stated that “consumers deserve the lowest possible total cost of their coverage and care.” Pointing out the medical claims ratio requirements, she said health insurers spend 98 cents of each dollar premium on medical care, operating costs including care management, and preventing fraud, waste and abuse.
The Affordable Care Act exchange insurers raised their premiums higher than necessary in 2018 and are now expecting to pay out discounts of $ 800 million to individual market customers this year because they have not reached the threshold for the medical loss ratio. This is the result of an analysis by the Kaiser Family Foundation published this month. With the decline in medical claims ratios, health insurers in the individual, small and large group markets are expecting rebates of $ 1.4 billion based on their 2018 performance, the analysis said.
Health insurance profits are still rising. The eight largest publicly traded insurers posted net income of $ 9.3 billion in the first quarter of 2019, an increase of 29.9%. Over the course of 2018, they made a combined profit of $ 21.9 billion.