The 'scary' rise in health-insurance costs: 5 theories

Health-care premiums shot up 9 percent this year, according to a new survey by the Kaiser Family Foundation and the Health Research and Education Trust, pushing the annual cost of employer-provided coverage for a family above $15,000 — as much as a new Ford Fiesta. The rate at which costs is growing is "scary," says Sarah Kliff in The Washington Post: Premiums rose 113 percent since 2001 and Kaiser estimates that they'll double again, to $32,175, in the next decade. Why are health insurance costs rising so much faster than, say, wages or inflation?

1. Blame "ObamaCare"

We warned you, says Katie Mahoney at the U.S. Chamber of Commerce. President Obama's 2010 health reforms "do nothing to control costs and instead drive premiums higher," as insurers are forced to cover things like letting uninsured 26-year-olds stay on their parents' health plans and making preventative screenings free. Making 25-year-old factory workers "subsidize the health insurance of Harvard MBA candidates" is just one way "ObamaCare already has forced insurers to increase prices," says Don Surber in the Charleston, W.V., Daily Mail. They also had to jack up premiums now because starting next year, Obama will make them justify any double-digit rate increase.

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2. The big driver is rising medical costs

The Affordable Care Act (ACA) did contribute 1 to 2 percentage points to the 9 percent rate hike, says Jonathan Cohn in The New Republic. But that's a small, "one-time bump." The largest single cause is the steady "ongoing rise in health care costs," which the ACA will actually stem, if politicians have the will to use its tools. Even 42 percent of doctors think their patients are getting too much care, according to a new study in the Journal of the American Medical Association. The reasons include fear of malpractice lawsuits and misplaced incentives. "Physicians believe they are paid to do more and exposed to legal punishment if they do less," say Brenda Sirovich, M.D., and her colleagues.

3. Insurers guessed wrong

Health insurers set this year's sharp premium hikes last year, on the "expectation that the use of health services would go up because of an economic recovery that was starting and then it didn't happen," says Kaiser Family Foundation president Drew Altman. In fact, employers are reporting that their workers are using less medical care, says Beth Umland, a health care consultant with Mercer, quoted in The New York Times. "It always takes a while for underwriting to catch up with reality."

4. Free markets are inefficient for health care

The "incredible 9 percent" spike in prices as demand wanes is further proof that the "childish, simplistic belief that a 'free market' functions well in health care and health insurance... has no basis is reality," says Jon Walker at Firedoglake. For years, insurers and economists have promised that if consumers only had more "skin in the game," insurance rates would drop. Well, employees have been paying more and more out of pocket for years, and this is the result?

5. The workforce is older, and more expensive to insure

The recession and resulting "high unemployment has resulted in employers hiring fewer younger workers," says Karen Ignagni, head of trade group America's Health Insurance Plans (AHIP). Older workers, meanwhile, are retiring later, leaving employers with a grayer workforce and insurers with "an older and sicker risk pool." They had no choice but to raise premiums.