Is the Fed responsible for health care premium increases? | The Incidental Economist

Is the Fed responsible for health care premium increases? | The Incidental Economist:

Health spending is obviously relevant to premiums, but many other factors affect premium growth too. What everyone wants to know is why employer-sponsored health insurance premiums jumped up so much this year. Since health care spending growth has been low — at near 1990s levels — we can rule that out as an explanation.

Moving on, let’s consider some other things. For what follows, I’ve been aided by Charles Roehrig and colleagues of the Altarum Institute, with whom I exchanged email on this topic. The title of this post is explained in the final entry of the following list (“The underwriting cycle”).

Besides total health spending, what else affects premiums?

Profits. Insurers have been reporting a big profits lately, which implies premiums growing faster than costs.

If you are interested in understanding why premiums have risen far out of proportion to actual health care costs, please go to the link. There are no certain reasons, but this post offers lots of interesting (and plausible) possibilities, including the one in the title: Insurers are so heavily invested in bonds, that the low returns have "forced" them to turn to out-sized premium increases to keep profits up where they like them.

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