Rising medical costs — a key driver of the health insurance crisis — appear to be easing, the Wall Street Journal reported this week. According to the newspaper, there are two factors at work. The first is the recession. Since a large majority of people get health coverage through employment, their coverage gets more costly once they lose their jobs since they must buy costly COBRA coverage (many long term unemployed have lost that coverage) or pricey individual health insurance or HMO memberships.
In the case of the latter, more are opting for more affordable high deductible plans, which serve as a built in deterrent to the utilization of medical services. “People just aren’t using health care like they have,” Wayne DeVeydt, WellPoint’s chief financial officer, told the newspaper. “Utilization is lower than we expected, and it’s unusual.”
If the U.S. economy enters a post recession deflationary period as some economists expect and some Federal Reserve bankers worry aloud, premiums might even fall. That along with decreased utilization might head off potential market failure in the individual and small markets, troubled market segments that might not otherwise survive in their current form by the time most provisions of the Patient Protection and Affordable Care Act take effect in 2014 if sharp increases in medical costs and premium rates continue.