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Health Insurance Industry Says Rising Premiums Not a Cost Driver

Armen Hareyan's picture

America's Health Insurance Plans, pointing out to the earlier report by CMS about the growing expenses of nation's health care, said in a release that the rising cost of health insurance premiums are not necessarily responsible for the natio's growing health care costs. The statement says that the cost of health insurance plan administration, in fact, has declined from last year.

Earlier this morning CMS released a report, discussing the factors that are expected to influence the growth of the cost of health care untill 2019. AHIP (America's Health Insurance Plans) took the opportunity to immediately making its voice heard saying You see, it's not the health insurance plan administration, it's the rise in medical cost. The statement came this afternoon by the CEO of AHIP Karen Ignagni.

CMS found that health care's share of the economy grew 1.1 percentage points in 2009. This is the largest one-year increase in GDP share since the federal government began keeping track in 1960. The report found two primary drivers of the growth of health care cost. Those are the medical prices and utilization. They saw a projected increase in spending by 3.2 percent and 1.5 percent in 2009, respectively. Other key findings include:

“Rising health care costs are crushing our economy and adding a burden on working families and employers across the country. The new CMS data confirm that rising health care costs are driven by increases in underlying medical costs, not health plan administrative costs. In fact, the proportion of health insurance premiums that go towards administrative costs is declining as overall health care costs continue to soar. Without a national, long-term strategy to address the rapid growth in underlying medical costs, health care spending will continue to grow far faster than the economy as a whole, crowding out other important domestic priorities, such as education, energy, and deficit reduction," Ignani said in a written statement.

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Here are other highlights of the report

* “Hospital spending growth is projected to have accelerated from 4.5 percent in 2008 to 5.9 percent in 2009, as spending reached $760.6 billion.”

* “Spending growth for physician and clinical services is expected to have accelerated to 6.3 percent in 2009, up from 5.0 percent in 2008, with expenditures having reached $527.6 billion.”

* “Prescription drug spending is expected to have grown 5.2 percent in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion.”

AHIP says that CMS's report is consistent with the national data. It shows that the cost of medical and health care services is growing, which in turn hardly makes health insurance affordable for anyone. This data, consistent with CMS's numbers, is is collected and received from health insurance plans.