What's Driving Health Insurance Premium Increases In The New Year?

Dec 30, 2015

With the start of a new year comes an increase in health care costs for many local employers and workers. The average increase for 2016 health plan premiums reviewed by the state insurance departments of Oregon, Washington and Idaho significantly exceeded the rate of inflation.

Buried deep in the health insurance rate filings to state regulators is a breakdown of each proposed premium increase. Rate changes for health insurance in 2016 vary widely depending on your plan. But insurers are more consistent about which health care components bear responsibility for higher costs.

You might be surprised to learn prescription drug prices rank low in this data set as a cost driver.

"With change and uncertainty, oftentimes people are looking to try to point the finger at one particular bad guy,” said Jeff Gombosky, a lobbyist in Olympia for the industry group Pharmaceutical Research and Manufacturers of America. “I just think we have to go back and say, 'What are the facts?'"

The PhRMA people noticed other cost components loomed larger than drugs in 2016 insurance rate increase filings by the largest plans in Oregon and Washington. The list includes outpatient procedures, inpatient care, administration, professional services -- which includes office visits, physical therapists and chiropractors -- and sometimes, taxes and fees.

Premera Blue Cross is among the largest health insurers in Washington state. Company spokesman Eric Earling said increased use of emergency rooms is driving cost increases along with increasing frequency and price hikes for certain surgeries such as hip replacements and knee replacements.

But Earling is unwilling to give drug makers a pass.

"If we want to simplify it down and just talk about what are the factors that are really driving increases in the cost of medical care, the cost of specialty drugs and overall cost of prescription drugs is a very significant factor,” Earling said.

One example that comes up in nearly every conversation on this topic is the new set of treatments for hepatitis C. Sovaldi was the first of several promising drugs to come to market. It costs about $84,000 for a 12-week course of treatment -- or about $1,000 per pill.

"Specialty drugs can have really great benefits for patients that should receive them, but cost an incredibly high amount of money,” Earling said. “It's a challenge to balance that out.”

The Washington governor's budget office also called out "higher pharmaceutical expenses" this month. It gave that as one reason for a requested spending increase it will submit to the upcoming session of the legislature.

Gombosky countered with a statistic culled from the federal Centers for Medicare and Medicaid Services. He said prescription medicines accounted for just 2.2 percent of his home state's 2014 Medicaid budget after accounting for rebates from drug makers.

"One of the things that I don't think is known is that Washington state actually has the lowest overall costs in the state Medicaid program for prescription medications," Gombosky, a former state representative, said. "It ranks the lowest nationwide," which he attributed to high use of generic medicines.

Earling said health insurers like his company are also focusing on "member education" to control costs.

"If it's a sprained ankle, an urgent care clinic would be a great option instead of a very costly emergency room visit," he said. "That's more affordable both for the member and for the health plan."

State insurance departments review health coverage premiums for individual and small employer plans. State regulators do not oversee the rates charged on large employer group plans, which account for the majority of the health insurance market.