The hospital industry last week fired a new shot in the ongoing battle of blame over rising healthcare costs. The bullet came in the form of a report released jointly by the American Hospital Association and the Federation of American Hospitals that argues health plan premium rates are growing faster than healthcare costs.
While healthcare spending itself is still the "primary factor driving premium increases," the 43-page report concluded, "competition, legislation, regulation and difficulty predicting future costs are all contributors." Health plan profitability targets also play a major role in raising premiums as insurers attempt to balance profit imperatives with capital-reserve requirements, according to the report, which was prepared by the actuarial firm Milliman USA.
The underwriting cycle, which refers to the fluctuation in insurers' profits and losses over time, has recently approached "another high point," the report said, producing greater profits for health plans and adding ammunition to the argument that growing patient volume, as well as labor and technology costs, are not the only things contributing to premium spikes.
The cost report battle first moved into high gear last October, when the Chicago-based Blue Cross and Blue Shield Association issued a report scrutinizing hospitals' role in healthcare cost inflation, drawing the ire of hospital groups that said insurers and their hefty profits were the main culprits.
AHA and federation officials presenting the new report last week in Washington said it was not intended as a defense of the hospital industry but represents part of an ongoing effort to help inform public policymaking.
"This isn't defensive," said AHA Executive Vice President Rick Pollack. "It's just trying to tell the whole story so people have the facts and the perspective."
Saying she had little time to review the report when contacted by Modern Healthcare, American Association of Health Plans President Karen Ignagni said all sectors of the industry should work together to address the cost problem rather than engaging in the "traditional Washington blame game." "Our experience suggests that if the private sector doesn't work together, then the havoc that results from that is detrimental all around," Ignagni said.
The report follows a Blues study released earlier this year showing that a smaller portion of health plan premiums is going toward paying medical claims while profit margins have grown (March 3, p. 15).