Rising Premiums, Shared Challenges: An Unlikely Alliance between Policy Makers and Insurers

This week, numerous Americans will experience another series of premium hikes—among the steepest in recent years—as the US Government enters its fourth week of shutdown, with policymakers divided over the expiring ObamaCare subsidies.

By now, concern is mounting regarding the 200% premium increase for Anthem BCBS in Georgia.

Here’s the surprising truth: policymakers and insurers are often seen as adversaries - might actually be on the same side, trying to navigate a deeply flawed system. Both face the same core challenge: rising healthcare costs—yet both have limited tools to lower premium costs.

1. Neither Sets Healthcare Prices yet both are blamed when premiums rise

• Insurers don’t determine what doctors, hospitals, or pharmaceutical companies charge. They're price-takers, not price-makers.

• Policymakers, especially at the state and federal level, have limited authority to set or regulate prices in the private healthcare market.

2. Both Want Lower Costs: Cutting costs usually requires unpopular decisions, like limiting networks or pushing back against powerful provider groups.

• Insurers aim to keep costs down to offer competitive premiums and retain customers.

• Policymakers are under pressure to ensure affordability for voters and reduce taxpayer spending on subsidies through programs like the ACA.

3. Both Are Constrained by the Medical Loss Ratio (MLR). Policymakers created this rule to protect consumers- Insurers are legally required to spend at least 80% of premium dollars on medical care. However, in today’s environment, Insurers are spending over 100% of their premium dollars on paying medical care. An MLR over 100% means insurers are paying out more in claims than they’re collecting in premiums—before even accounting for overhead.

A Call for Collaboration

To effectively mitigate the growth of premiums, it is imperative for insurers and policymakers to collaborate in reducing the Medical Loss Ratio (MLR). This effort may involve:

• Reforming payment systems by transitioning from fee-for-service to value-based care.

• Enhancing price transparency to enable consumers to make informed decisions.

• Strengthening negotiations with providers to address excessive charges from hospitals and physicians.

• Revamping prescription drug policies

These solutions are not simple to implement; however, they address the fundamental causes of increasing premiums rather than merely the symptoms.