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Monday, August 16, 2010

Why are my insurance premiums so high?

I have heard some people explain that private insurance premiums are rising because commercial (or private) insurance companies are making up for the difference in the rising cost of Medicare/Medicaid. However this is not true. Private insurance companies do not fund Medicare/Medicaid from the premiums they are charging their subscribers. Private insurance pays doctors and hospitals from the premiums they collect. They tie what they pay pto doctors/hospitals to Medicare’s fee schedule. Since Medicare is a government social program, it is by definition, the lowest payor for services. Private insurance, being a commercial, for-profit business, has abused the Medicare system for decades, by using Medicare to formulate their payments to doctors and hospitals as a percentage above Medicare, in order to maximize their profits. How? Because, 110% of Medicare five years ago, is 105% of Medicare today, and 95% of Medicare tomorrow, as Medicare rates have been dropping steadily for the past twenty years. This means what private insurance pays out to doctors and hospitals has been DROPPING. Physicians need to renegotiate their contracts, demanding higher percentages from the insurance carriers to maintain the viability of their businesses. However, in many cases doctors contracts with an insurance company are two to five years. Private insurance has been profiting hugely using this scale of payment. It is no news about the huge CEO salaries, and unbelievable profit margins they have realized over the past fifteen years.

Doctors and hospitals are suffering from the decreasing revenues from Medicare and the increasing volume of Medicare patients, and a DECREASE in reimbursement from private insurance. Private practice physicians must negotiate for higher percentages from private insurance companies to make up the gaps – to keep their technology up to date, to ensure proper staffing, to cover the increasing costs of malpractice insurance. This does not mean higher premiums for their subscribers. This means a necessary shift of the insurance companies internal dollars. They have been gouging the public for years. It is time the physicians stopped being bullied by the insurance companies, the public demand lower premiums, employers educate the employees, and politicians understand how it all works instead of being manipulated by the insurance lobby.

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