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Health Insurance Premium Rises 29 Percent

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With a form letter issued last week, a major health insurance provider in New York may have made the most compelling case of all for creating a "public option" for health care coverage. That letter, received by a family that I know, informed them that their premium would rise by 29 percent in October.

Not only was the increase staggering, but it raised the prospect of having the cost of that family's health insurance coverage more than double in the next four years. How many Americans can keep up with increases of that magnitude?

My first reaction on learning of the letter was to wonder what could possibly cause a health insurance provider to increase its fees by 29 percent at one time. My second reaction was to wonder why the company would raise its rates so significantly just when the federal government is grappling with health care reform and the possibility of a public option to compete with private insurers.

But an even more fascinating question is: What kind of company can afford to raise its rates by 29 percent in one of the worst recessions in U.S. history? Most businesses across the country are reducing their prices -- many slashing them dramatically -- but health insurance is apparently not only immune to those pressures but able to counter-balance them.

That circumstance arises either because the company has insufficient competition or its customers have difficulty shifting to a competitor. In the case of health insurance providers, the latter is especially the case.

Their customers are virtually locked in, forced to go along with any rate increase, because of the difficulty of taking their business elsewhere. Fortunately, the family in question has not been sick, but for anyone with a pre-existing condition, moving to a new insurance company can be almost impossible.

And the insurance company doesn't even have to provide a justification for the rate increase. In this case, the letter offered no explanation at all.

One is left to wonder just what costs could be justifying the increase: salaries aren't rising by 29 percent in a recession. Most people are happy just to have a job, and even contractually mandated labor costs don't rise 29 percent in a year.

The health insurance in question is an HMO, so the extent of service provided is constantly monitored by the insurance company. Every medical visit, test, or procedure of any kind must be pre-approved.

Clearly the cost of health care is rising, but is it rising by 29 percent per year? U.S. Secretary of Commerce Gary Locke recently stated, in an op-ed in The Wall Street Journal, that "Absent reform, the price of an average family's insurance will nearly double over the next decade." Why then is this insurance provider raising its premium by 29 percent?

During the current Congressional recess, prospects for a "public option" have diminished significantly, as special interests have bombarded town hall meetings with organized opposition. But if health insurance premiums rise 29 percent each year, one can only wonder how long Members of Congress can remain opposed.

It's a very small number of voters who can bear that kind of health insurance increase over a period of years. And ultimately it's voters, rather than special interests, who determine the outcome of elections.

At present, in an off-year for elections, the health care reform debate is focused on Washington, DC, where special interests hold inordinate sway, but in 14 months, that focus will shift dramatically. Every Member of the U.S. House of Representatives and a third of the U.S. Senate will be up for election, and it will be fascinating to see what message on health care reform the voters send.

A lot will depend on what legislation is adopted in the meantime, but if health care costs continue to rise at this rate, the ranks of the uninsured will only grow, the public clamor for universal coverage will only increase, and opposition to the "public option" will fall away.

Health insurers, like this one in New York, are doing their supporters in Congress no favors. They're making the public case for greater competition.

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