Health insurance rate increases in California may not be beneficial for insurers

California health insurance

Insurers could be having trouble keeping up with the rate of medical inflation

Fitch Ratings expects that health insurance rate increases in California will be a benefit for non-profit hospitals, but their impact on insurance companies is still uncertain. Insurers have been pushing for higher rates for the coverage they provide in the state and have been able to institute these rates regularly. The problem, however, is that the most recent round of rate increases may not be enough to help insurance companies keep up with the rate of medical inflation.

The cost of medical care continues to grow

Medical care is becoming more expensive with every passing year. This has to do with health care professionals making use of more expensive equipment and adopting better care practices, all while hospitals are working to generate revenue. Health care professionals are becoming more expensive to hire as well, and hospitals are ramping up the costs of the services they provide in order to remain financially sustainable. Higher health care costs are forcing insurance companies to hike up premiums, but certain regulations make increasing premiums a difficult process.

Rates for policies sold through state’s exchange expected to increase by 4.2% next year

California health insuranceAccording to state officials, health insurance plans sold through the California insurance exchange are expected to see their rates increase by an average of 4.2% next year. Rate increases have been kept to a modest level in order to ensure that consumers are not driven away from certain types of coverage. If insurers can attract new and healthy consumers to the state’s exchange, their rate hikes may have a positive impact on their business. If not, however, the expected rate increases may not have the desired effect for insurers.

Insurance rates may not be keeping up with the cost of medical care

In California, regulators do not have the authority to extensively police rate increases in the private market. The state’s insurance exchange is a different matter, however. Rates are rising slowly in the exchange, and that could become a problematic issue for insurance companies if medical care continues to grow more expensive without any mitigation.

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