Health Insurance Rate Expectations for 2011 UPDATED

Back in September, I predicted that health insurance rates for 2011 would see approximately the same amount of growth as they did in 2010, just under 15% (14.8% was my prediction). Really going out on a limb, right? For the last 4 years the average national health insurance increase has been in the double digits and averaged 10.3%, while last year we saw increases locally in the 15-20% range.

Well now there is a new report out compiled by Weiss Ratings (an independent rating agency) showing that health insurers saw total national medical expenditures decrease by 1.6% for the first nine months of 2010. This report corroborates what we were hearing earlier about utilization.  That 1.6%  represents a $3.7 Billion decrease from 2009. Based on the current trend, Weiss expects expenses for the entire year will decline as much as $9.8 Billion or around 3% from 2009. This is great news for most insurance companies as it means that they collected much more in premium than they paid out in claims which means that they’ve seen their profits increase greatly this year. And it’s already reflected in their stock prices. As a group, health insurers paid out only 71% of premiums on medical costs. In other words, they had a Medical Loss Ratio (MLR) of 71%. Under the new health care reform law, insurers will be required to have an MLR of 80% for small groups and 85% for large groups or pay policy holders a refund. Unfortunately, that portion of the law doesn’t take effect until 2011, so no soup for you!

Hopefully, insurance companies will pass along at least a portion of these savings onto their customers. Based on the above info and the scrutiny that insurance companies have been facing over the last year due to the new law, I am expecting insurance companies to reduce their increases fairly substantially from my earlier prediction of 14.8%. My new prediction is that we will see increases in the 5-7% range with my exact prediction coming in at 6.4%. That’s right! We’re still going to see increases (due to medical inflation and higher utilization as the unemployed return to the work force) but they will be in the mid-single digits, which will practically feel like a rate cut once employers tweak their medical plans. Again, this is a prediction based on the average increase for all insurance companies around the country. Locally, some businesses may actually see REAL decreases (maybe a percent or two).


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: