Home

FEBRUARY 1998

Health-care hikes: a reminder of impact of costs

The threat of dramatic increases in health care costs - made evident by recent news of possible rate hikes at two major insurers - reinforces how much health-care costs affect the economy and the need to move cautiously on proposals that would increase those costs.

Governor Pataki has proposed tapping the state's $87 million high-risk insurance pool to offset huge rate hikes projected for many carriers, including Empire Blue Cross and Blue Shield and Oxford Health Plans.

The pool was created as part of insurance reform in the early 1990s, according to Elliott Shaw.

The law imposed a surcharge on health insurance carriers to create a pool to subsidize insurance premiums for high-risk populations. The pool has not worked properly, so funds have not been distributed. As a result, the fund has grown.

Both the insurers' woes and the dramatic nature of the proposed solution should reinforce the impact of health care costs on the economy, Shaw said.

"The rate increase projected for Empire and Oxford would increase health care costs from 40 to 70 percent for some businesses, especially sole proprietorships," Shaw said. "This would devastate many companies."

Regardless of whether the pool is used, Shaw said, projected increases - and the chance of more rate hikes for more insurers - should give legislators pause in considering a number of proposals that would drive up costs.

Pending cost-escalating proposals include bills to mandate increased levels of mental health coverage and proposals to impose medical malpractice on health maintenance organizations.

February 19, 1998