CA small businesses greet New Year with health insurance hangovers
December 29, 2014
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I thought it would be an excellent time as I recover from my bout with the flu to check in on the state of my state...and it looks like the diagnosis is poor---especially if you own a small business in California, as a leading health insurance provider is hiking rates:
Health insurance giant Aetna Inc. is imposing excessive rate hikes on more than 5,000 small employers, according to California's insurance commissioner. Commissioner Dave Jones lashed out Thursday at the third-largest U.S. health insurer for raising premiums as much as 20% on some small businesses starting Jan. 1. The average increase of 10.7% will cost small employers and their workers $23.5 million in excessive premiums, according to the state. ...Aetna said its rate increase was justified based on the expected medical costs for employers. The Hartford, Conn., insurer rejected the state's request for a lower increase. The state said a 2.6% increase was more appropriate for this group of 64,000 employees and dependents.While the finger is being pointed at the "evil insurance company", an analysis by Cal Watchdog's James Poulos shows that Obamacare (i.e., Affordable Care Act) is most likely the root cause.
...From a bird’s-eye view, however, some analysts have pointed out that Aetna’s rate increases are a rational result of the market distortions created by the ACA’s regulatory framework. As Scott Gottlieb argued at Forbes, “Obamacare was designed with the goal of commoditizing health insurance. The belief was that competition between plans would turn largely on premiums and cost sharing. This was seen as a way to hold down prices.” What happened instead, Gottlieb explained, was that pushing down on competition in the areas of networks and care delivery discouraged competition between “different benefit packages and plan designs.” In other words, the big, established coverage providers discovered they could create many variations on very similar benefit packages. In a free market for health care, different plans would differ in their benefit packages as well — giving small business owners, for instance, greater options around not just scope of coverage but cost of coverage. Instead, the ACA has dramatically narrowed their available coverage, leaving business owners with little alternative to Aetna’s hiked rates.