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Bracing for Increasing Healthcare Premiums

The new healthcare reform bill may have had an unintended side effect. Because the new laws allow children to stay on their parent’s insurance plans longer, allows people with pre-existing conditions to get coverage (starting in 2014), allows children with pre-existing conditions to get coverage now, and allows some people to avoid the system altogether and take advantage of Medicare, insurance companies are complaining that they need to raise rates in order to cover the additional costs and possible lost premiums.

Premiums vs. Profit

While it may be true that insurance companies will need to spend more post-healthcare reform, it is also possible that they are taking advantage of the new laws to create even greater profits for themselves. It’s almost like the way oil companies work – have you ever noticed that when gas prices go up, the executives say that it is due to increased oil prices – but invariably, their company profits end up going up too? How does that happen? Well, they are increasing the price not just to accommodate for increased expenses, but also to lock in their profit on those increased expenses.

When prices go up as a result of increased expenses, profits should – in the least – be completely unaffected. But when profits go up too it means that someone is profiting off of the system, the increases, and the people.

When shopping for health insurance today, be sure to keep in mind the possibility that rates might need to increase in the future. While some of the hikes may be aggressive, chances are good that state and federal regulators will prevent insurance companies from becoming too greedy. But, as always, keep an eye on the news and pay attention to the tact your insurer seems to be taking. If you feel like your insurance company is becoming too aggressive and demanding, it may be tie to switch.

September 17, 2010

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