The beginning of the year was punctuated with a rash of insurance rate increases coming from many of the nation’s insurance companies. Insurers had defended their weighty rate proposals with the claim that the cost of medical care was rising out of control. Higher rates may also be due to a provision of the Affordable Care Act that requires insurers pay no less than 80% of their collected premiums on health care. While insurers have been quick to propose rates that are, in some cases, astronomically high, industry experts believe that the pursuit of higher rates could see its end in 2012.
As the uncertainty surrounding the Affordable Care Act abates, the impact it is having on the insurance market may not be as dramatic as some may have thought. Brian Driscoll, chief operating officer of Ovation Benefits, an independent brokerage based in Connecticut, believes that the market, as a whole, is beginning to soften. This may lead to much smaller rate increases in 2012 with insurers scarcely leaving the single digits area.
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The market may be softening, but the costs of health care continue to rise. This will put insurers in a difficult spot when it comes time to raise rates. With pressure from federal mandates requiring them to pay more for medical care, insurers may be forced to levy excessive rates for the sake of solvency. If insurers cannot find a balance and if the issue of pricey medical care cannot be resolves, the health care reform may have little to no effect in the long run.