As Health Care Costs Rise, We All Pay

I am one of the millions of Americans who have had trouble getting health care. After I left grad school I tried to get coverage with Anthem Blue Cross. A month after I applied I was informed that they were canceling my application because my doctors had refused to send them my information, even though my doctors told me Anthem had never contacted them. After my doctors sent Anthem my records, Anthem again told me they were cancelling my application. This time it was because I supposedly hadn’t given them my birth date.

After four months of this, they finally told me I wasn’t eligible for coverage because a year before I had taken a drug to help me sleep as part of treatment for trauma. Judging from how difficult Anthem made it just to contact them, I decided they had no interest in selling me health insurance, and were simply looking for an excuse to deny me coverage.

Why would they want to sell me insurance? As much as I would like to blame the health insurance companies for this—and while I think I was treated incredibly badly—the truth is that they don’t make much money off individual policies. Health insurance companies managed a relatively modest 2.2% profit margin in 2008. And most of that money comes from employer-sponsored plans. WellPoint, which owns Anthem, recently announced that it’s raising premiums for the Californians it actually does insure by as much as 39%, after having lost millions of dollars last year on its policies for individual Californians. With medical costs far outpacing inflation and the pool of people it insures getting older and sicker, Anthem says that what it collects in premiums is no longer enough to cover what it pays out in claims. It’s probably true. As Dan Mendelson, the president of Avalere Health, says, “You wouldn’t see a 35 percent increase in price because they’re trying to make more profit. It just doesn’t work that way.”

As Michael Hiltzik says, the insurance industry “acts as if it will have trouble making money unless regulators allow it to cover only injuries suffered by a young single male hit by an asteroid.” But the fundamental problem is not that individual health insurance companies are gouging us, but rather that health care costs are so out of control. As I’ve written before, health care costs much, much more in the U.S. than anywhere else in the world. And health care costs in the U.S. continue to balloon. As they rise, insurance policies cover less and less—and fewer and fewer of us have them. And while it might make sense to pay out of pocket for our regular medical expenses, very few people are rich enough to cover their own medical expenses should they become seriously ill.

The health care bill before Congress doesn’t do as much as it should to control medical costs. But without health care reform, as Reed Abelson argues, the situation will only get much worse. The inefficiency of our medical system is a huge drag on our economy, and the rising cost of health care a major reason the deficit continues to grow. As it takes a larger share of our incomes to cover our medical expenses, our disposable incomes shrink, making us effectively poorer. And as the number of uninsured grows, many people will die sooner than they otherwise would have. If we don’t manage to do something soon, the premium hikes in California will be only the beginning.