Why Health Insurance Premiums Rise


As Health Costs Soar, G.O.P. and Insurers Differ on Cause


Cheryl Senter for The New York Times

Buddy Zaremba, vice president of RAM Printing in Manchester, N.H.


Cheryl Senter for The New York Times

Robert Woodland, president of Woodland Design Group, which has seen their health insurance premiums rise by 43 percent.


Readers' Comments

Readers shared their thoughts on this article.

The new federal health care law may eventually “bend the cost curve” downward, as proponents argue. But for now, at many workplaces here, the rising cost of health care is prompting insurance premiums to skyrocket while coverage is shrinking.

As Congress continues to debate the new health care law, health insurance costs are still rising, particularly for small businesses. Republicans are seizing on the trend as evidence that the new law includes expensive features that are driving up premiums. But the insurance industry says premiums are rising primarily because of the underlying cost of care and a growing demand for it.

Across the country, premiums have more than doubled in the last decade, with smaller companies particularly hard hit in recent years, federal officials say.

In New Hampshire, where the population is among the healthiest in the nation, according to various surveys, the insurance market for individuals, families and small businesses is extremely fragile. More than 90 percent of private employers in New Hampshire have fewer than 50 employees. Small and medium-size employers try to shop around for health insurance, but have few alternatives from which to choose.

This year, groups of more than 20 workers have been experiencing premium increases of around 20 percent, insurance agents say, while smaller groups are seeing increases of 40 percent to 60 percent or more.

“The rate of increase is phenomenal,” said Jean Pierre La Tourette, owner of Flora Ventures, a florist with 11 employees in Newmarket, N.H., near Portsmouth. When he was recently notified that the monthly premium for single employees at his firm was going up by $229, or 40 percent, to $789, Mr. La Tourette said, he felt “a combination of anger and frustration.”

Economists and state regulators say health insurance is expensive primarily because health care is expensive.

“You won’t really address the cost of health insurance unless you address the cost of health care itself,” New Hampshire’s insurance commissioner, Roger A. Sevigny, said.

In a letter explaining Mr. La Tourette’s new rate, Anthem Blue Cross and Blue Shield said it resulted, in part, from “an increase in medical trends, especially the utilization of services and the underlying cost of health care, for all small-group customers.”

William P. DeLuca III and his family own several companies, including four car dealerships and the Bank of New England, which together have 550 employees in New Hampshire and eastern Massachusetts. To obtain a better rate, Mr. DeLuca said, he switched this year to Harvard Pilgrim Health Care from Tufts Health Plan. The Tufts increase would have been 23 percent, he said, while Harvard Pilgrim’s was 19 percent.

“It’s out of control,” Mr. DeLuca said. “The cost of living is barely going up 1 or 2 percent a year. But we and our employees have to absorb these huge increases in health insurance costs.”

Some insurance industry lobbyists say the new federal health care law is driving up premiums. But Vincent Capozzi, senior vice president for sales and customer service at Harvard Pilgrim, said that only one percentage point of the increases here was attributable to the federal law, mainly its requirement for free coverage of preventive services.

Another percentage point results from new state laws requiring coverage of hearing aidsand certain treatments for autism, Mr. Capozzi said. Most of the remainder, he said, reflects increases in the use and cost of medical care by small-group customers, with adjustments for demographic characteristics like age.

In many cases, insurance coverage is shrinking as deductibles are increasing and choices of hospitals are more limited. Robert I. Woodland, the president of the Woodland Design Group, said his company had experienced double-digit increases in premiums for seven years, even as benefits were whittled back. Most recently, he was notified that the rates were being increased 43 percent, so the monthly premium for a single worker would be $550, up from $384.

“Essentially, we have been paying a lot more for a lot less,” Mr. Woodland said. “It’s outrageous. I cannot imagine charging my clients 43 percent more in a single year.”