Health Care

Greed, Not Need, Drives Up Health Insurance Premiums

| by AFL-CIO

By James Parks

As members of Congress continue to debate health care reform, they should read a new report that shows insurance companies have nearly doubled the cost of premiums over the past eight years. That’s twice the rate of medical inflation and more than three times faster than wages in the same time period.

The report from Health Care for America Now (HCAN) sets the record straight on insurance industry claims that huge increases in premiums are the result of rising health care costs driven by doctors and hospitals. HCAN is a national grassroots campaign of more than 1,000 organizations in 46 states representing 30 million people dedicated to winning quality, affordable health care.

Richard Kirsch, HCAN’s national campaign director, said during a recent press conference call that insurance premiums went up 97 percent for families and 90 percent for individuals from 2000 to 2008. Underlying medical inflation, calculated from the Consumer Price Index, went up only 39 percent.

In short, over the past eight years, premiums almost doubled, but medical inflation went up only 39 percent. Premiums rose two times faster than medical costs and more than three times faster than wages, which only rose 29 percent in the same time period.

Yet, companies like WellPoint are raising premiums by as much as 39 percent in California and by double digits in at least 11 states. So while doctors and hospitals are making more profit than they used to, insurance companies are raising their rates much faster than even thatmore than 20 percent faster than the amount they are paying doctors.

No wonder insurance companies are making record profits. Gaining control over rising and irrational costs is one of the main goals of the AFL-CIO health care reform effort. Click here to read more about our health care goals.

Where does all the money go? Not to care for the policyholders. Last year, the five largest insurance companies had 2.7 million fewer policyholders and still made record profits. The money, HCAN says, goes to salaries and perks. In fact, according to the report, from 2000 to 2008 insurance companies spent $716.4 billion of premium dollars on administrative costs, CEO salaries and investor profit, almost enough to pay for the entire health reform bill.

One more reason why it is important to get health care reform right. Says HCAN: 

The underlying cost of medical care is not driving insurance rate hikes. Greed is the singular driving factor at work. And our health care system must be reformed to fix this glaring, deadly problem.

Read the entire HCAN report, “Health Insurers Falsely Claim Rising Costs Justify Soaring Premiums,” here.