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Health insurance premiums up in N.J. individual, small employer markets

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Health insurance premiums rose in 2012 for the majority of people covered in the state-regulated individual and small employer markets, according to the state Department of Banking and Insurance.

Premiums have risen in New Jersey and nationwide for years, and health care experts say the rising cost of medical care, coupled with new federal rules that increase the services that health insurers are required to include in the health plans they sell, continue to drive up premiums.

About 650,000 New Jerseyans have employer-sponsored coverage through the state's small employer market, for employers with fewer than 50 workers. About half the premiums increases in that sector were less than 10 percent, while the remainder of the increases averaged 15 percent, according to DOBI.

About 140,000 New Jerseyans are covered through the individual market, where all premiums increases in 2012 were under 10 percent, according to DOBI. Premiums rose less than 1 percent, or decreased, for the most popular plan in the individual market, the Horizon Basic and Essential plan, which provides a less extensive menu of benefits at a lower price than the typical health plan. According to DOBI, more than half of those covered in the individual market use the Basic and Essential plan.

Christine Stearns, vice president of health and legal affairs for the New Jersey Business & Industry Association, said the rates reported by DOBI "are consistent with what I have been hearing from employers."

"Employers' top priority is getting the best value for their money -- meaning the best coverage for a price they can afford. For small companies that means carefully evaluating network options, benefits, deductibles and cost sharing to find an affordable balance."

DOBI spokesman Marshall McKnight said state law mandates an 80 percent loss ratio for health insurers, meaning they must pay out 80 cents in medical claims for every dollar they collect in premiums. Insurers refund money to customers when their loss ratio falls below 80 percent.

Ward Sanders, president of the New Jersey Association of Health Plans, said, "The common driver for increasing premiums is the underlying cost of care: the cost of seeing the doctor, going to the hospital, prescription drugs, etcetera." Insurance premiums have been rising for years: Sanders said the last time rates were flat was in the mid-1990s when health insurers shifted to managed-care plans.

Individuals who qualify for the federally subsidized health insurance that will be sold on the new exchange marketplace in 2014 under the Affordable Care Act could see their own health insurance premiums decline, even as the underlying cost of health care continues to rise, Sanders said. Because of the subsidies, "There will be some people who will get coverage on the exchange that may be less than what they are (paying) now. But it is important to remember that the underlying cost of care is what drives premiums and there is no magic bullet, other than the subsidies, to bring down the cost of coverage."

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