Baby boomers relying more heavily on medical care could lead to a surge in spending
Baby boomers are entering their “golden years” and this may have a significant impact on health insurance premiums for everyone else. An estimated 76 million people from the baby boomers generation are expected to create a surge in spending on prescription medications, health care, and hospice car. This may become a major financial issue for insurance companies, with insurers like UnitedHealth and WellPoint seeing few other options than raising rates. For some states, premiums may grow by a significant margin when compared to those in other states.
Large states may be well prepared to handle any spending surge they see in the coming years
Some insurance markets are better prepared for a spending surge than others. States like California and New York are home to large pools of consumers and insurers. As such, the financial burden of medical care among the insured can be spread out, providing insurance companies with some flexibility in regards to raising rates or keeping rates stable. In smaller states, however, insurance rates could be on the rise.
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Small states could suffer due to lack of competition
According to data from the Kaiser Family Foundation, states like Rhode Island could see a significant spike in health insurance premiums in the coming years. This is because small markets are almost exclusively controlled by large insurance companies. Rhode Island’s largest insurer, for example, controls 94% of the state’s market. This gives the insurer virtually no incentive to compete with others in terms of price, allowing it to set prices as high or as low as it wishes, as long as it complies with state regulations.
Finding a solution to the competition problem may not be easy
States may need to address the lack of competition if they want to ensure that insurance coverage remains affordable. This can be a problematic issue, however, as attracting insurance companies to new markets can be a difficult endeavor. If a solution cannot be found, residents of small states may soon end up paying more for their insurance coverage than they already are.