Health Insurance Companies Expect Premiums to Rise

by Mark Friedman  on Monday, Sep. 6, 2010 12:00 am  

(To view the list of the larest health insurance companies in Arkanas click here. A spreadsheet version is also available.)

The first wave of expanded health insurance benefits is starting to show up now under the health care reform that Congress approved in March.

Health insurance companies, though, are expecting to receive more in premiums, but not necessarily an increase in profits, because of the reforms, which will be fully implemented in 2014.

Some early provisions have already been implemented. Insurance companies can no longer deny coverage to children under the age of 19, said Michael Stock, president and CEO of QualChoice of Arkansas Inc.

"You have to take everyone no matter what their medial condition," Stock said. "So that will result in some pretty high premiums on those individual contracts where you might have a young person that's got a significant medical condition."

And for group policies, dependants up to age 26 are now covered, he said.

"That's having a slight impact on premiums," Stock said.

Starting Sept. 24, a lifetime cap of $5 million for benefits is gone. "So somebody could run up" an unlimited amount in medical bills, he said.

"Each of those is not significant, but you start adding up 1 percent here, 1 percent there; it starts adding up," Stock said.

And beginning in January, the minimum loss ratio goes into effect. For groups with fewer than 100 employees, insurance companies have to spend 80 percent of the premium collected on medical care or send the policy holder a refund. For a group with more than 100 people, the loss ratio is 85 percent.

"That limits how much is left over to cover administration [costs] and profit for the carrier," Stock said.

But if the medical costs exceed the amount of the premium paid, the insurance company is out of luck. "The law allows us to lose and bear the full cost of that, but it limits how big a win can be," Stock said.



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