The cost of health insurance is rising for everyone that needs to pay for health care. This includes employers as well as individuals. States such as California are seeing rising health care costs that force people to pay more and receive less coverage. The rising health insurance premiums in California are not being helped by the lack of competition in many of the markets in the state. As a result the share of premiums for employers and employees continue to increase.
Increased Market Share
In many insurance markets in California the top two or three health insurance companies control over 50% of the market. A high market share means there is less competition for health care in a particular area. This can lead to higher costs for the insurers because these markets are highly concentrated. Areas of high concentration for health insurance companies means any price increases affect a larger proportion of people.
Increasing Premiums
Residents in California have seen premiums increase almost 100% over a seven year period form 2000 to 2007. The average earnings of a worker during this time increased only 19% from nearly $36,000 to $31,000. This indicates that the premiums paid for health insurance increased five fold for families in California from 2000 to 2007.
Anti-Competitiveness
Many of the national health insurers that service California plays a dual role because they are the ones that sell health insurance and buy certain types of health care services. This means that larger insurers can use economies of scale to create deals with various providers to maximize profits. As a result doctors have little bargaining power over prices that are being charged. Any change in the price structure is passed along to consumers in the form of higher premiums and co-payments.
Executive Pay and Profits
The profits for many of the nations largest health insurance companies that are publicly traded rose over 400% from 2000 to 2007. Top executives from ten of these companies earned a combined total of almost $119 million in compensation during this period. This is about $12 million each compared to the average Californian resident who earned just over $36,000 for the same period.
Other Expenses
Many of the health insurers and doctors that are located in California have various types of expenses in addition to salaries that are paid. This includes administrative costs for the billing of services and payments that needs to occur. There are also costs for malpractice insurance and legal costs that are paid each year. This can result in increased costs for consumers to offset these rising costs of insurance and other expenses.