The real reason your insurance premium is increasing

Last week, America’s Health Insurance Plans (AHIP) President Marilyn Tavenner and American Hospital Association President (AHA) Rick Pollack took to The Hill with an op-ed that continued to spread pervasive myths against our industry.

In their op-ed, Tavenner and Pollack claim drug prices are the reason insurance premiums are on the rise:

“Unjustified and unaccountable spikes in prescription drug prices are the engine of higher costs.”

That is false.

The truth lies in the insurance industry’s own rate justifications that show prescription drugs are not the cause of rising premiums. According to a study from Avalere, a leading policy consultant to the insurance industry, on premium increases in 2016, “premium growth is primarily driven by inpatient and outpatient hospital spending.” And a more recent Avalere study found that, “outpatient spending is expected to be the largest driver of premium increases in 2017”.  Drug costs accounted for merely 14 cents of every dollar increase in premiums.

The true driver of premium increases are hospitals—and AHIP knows this—just look on their blogs: “Hospital mergers and physician practice acquisitions give physician practices and hospital systems stronger market power to drive up prices for patients.” “While the rhetoric behind consolidation is about efficiency, the reality is higher prices for consumers.” 

Even a Consumers Union official compared insurers’ blame of drug costs as a “Trojan horse with which to usher in excessively priced insurance rates.”

Part of their distraction is to hide the reality that biopharmaceutical innovations can help save money–both for the patient and the broader healthcare system. Finding a treatment to a disease can eliminate countless doctor visits, surgeries and hospital stays.

So, the next time Big Insurance complains about healthcare costs, perhaps they should look at their own books. 

Big Insurance are under investigation in multiple states for civil rights complaints over their discriminatory policy practices.

Big Insurance are storing billions in reserves, while hiking premiums for middle-class families.

Big Insurance use extreme cost-sharing, in the form of higher patient co-pays, and specialty tiers to push sick people off their plans because it’s bad for their bottom line.

Big Insurance spend just as much on administrative costs as they do on prescription drugs for sick patients.

It’s truly disappointing that–despite all the evidence pointing to the contrary–Tavenner, Pollack, and their allies continue to blame premium increases on prescription drugs.

It’s time for the insurance industry to acknowledge what’s in their own companies’ data and come to the table with biopharmaceutical companies, Pharmacy Benefit managers, and health care providers to present real data to make the health care reimbursement ecosystem transparent and, more importantly to ensure all sick patients have access to the medications they need.

Paul Hastings is a member of BIO’s Board and Chairman/CEO of OncoMed Pharamceuticals. He is the Chairman and CEO of OncoMed Pharmaceuticals. 

The views expressed by authors are their own and not the views of The Hill.