Who Is Paying for Obamacare?

(You Are — Maybe)

by Gavin Magor | June 30, 2014

In a market that totaled over $450 billion in premium income for insurers during 2013, the average cost of healthcare insurance per person increased $12.44 per month or 5.9 percent in the first quarter of 2014. We have all heard rhetoric about the horrendous cost of Obamacare and how premiums are now skyrocketing. So, what is the truth?

It depends on who your insurer is, according to a new study by Weiss Ratings, the nation’s leading provider of independent insurance company ratings.

In an analysis of 784 healthcare insurance providers across the nation, there was a distinct difference in the premiums paid by consumers for coverage by a company with a parent that is traded on the stock markets versus those that are privately held.

Initial findings show that the average premium paid during 2013 was $211.85 per month for all types of health coverage. The amount paid by consumers to privately held companies was $188.44. In 2014, premiums rose $5.16 or 2.7 percent on average to $193.60, at these private companies.

In contrast, average premiums charged by publicly-traded insurers in 2013 were $266.61. In 2014, these insurers increased premiums by $35.81 per month or 13.4 percent to $302.41.

On average, a consumer with a policy from a public company in 2014 will pay a whopping $108.81 or 56.2 percent MORE per month than someone with coverage from a private insurer.

What does this mean? Aside from the impractical, but obvious “change your insurer,” it suggests that either the public companies are simply making more money on your dime. Or, they must cover a larger expense burden.

The good news: Since 2011 insurers, with a few exceptions, have been required to spend 80-85 percent of your premium on medical expenses. Then, why is there such a large difference between private and public insurer rates? And, has the increased number of sick people insured through Obamacare caused the increase in premiums?

Let’s look back for perspective. In 2012, the average claim and claim related expense per person per month was $183.94. This went up to $190.08 or 3.34 percent in 2013, and again in the first quarter of 2014, to $197.67, an increase of 3.99 percent. The ten year average increase in claims is 4.95 percent.

The average claim per person with a private insurer saw a higher than average ten year increase of 5.1 percent. In the first quarter of 2014, private insurers’ claims went up $1.90 per month or 1.1 percent. In 2013, the increase in claims was 2.47 percent.

For publically-traded insurers, the ten year average increase in claims was 4.51 percent, lower than the private insurers. In the first quarter of 2014, claims went up $25.96 per month, or 11.08 percent. In 2013, the increase was 5.15 percent.

Although first quarter results may not be representative of the remainder of 2014, at the time of this study, publically-traded companies did have higher medical expenses than private companies. Those higher medical expense levels may be partially explained by the mix of coverage offered along with increased exposure to the previously uninsured. So, expenses do, in part, justify the higher rates.

Unfortunately, no matter how justified the higher premiums may be relative to the total cost of claims, unless coverage is significantly better, a 56 percent differential in premiums will be extremely tough to explain to consumers.

Note: Weiss Ratings study consisted of 784 healthcare providers across the nation filing statutory financial statements with more than 1,200 enrollee months during 2013. Data was provided by the NAIC and SNL Financial.

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