How Tort Reform Can Raise Health Care Costs

Texas has been a magnet for doctors since they enacted tort reform a few years ago. (See Doctor’s Flock to Texas After Tort Reform from the Wall St Journal).

The result? Insurance premiums have nearly doubled.

From the Austin American Statesman:

Insurance premiums rose 91.6 percent in Texas

By Mary Ann Roser | Tuesday, September 15, 2009, 12:48 PM

A national report that was released today says family insurance premiums in Texas increased 91.6 percent since 2000 – 4.6 times faster than earnings.

The report by the nonprofit consumer organization Families USA says the rise in health care premiums for workers went from $6,638 for the average Texas family to $12,721 a year, but folks got less for their money rather than more, according to the report. At the same time, median earnings of Texas workers rose from $23,032 to $27,573, a 19.7 percent increase.

“Our conclusion is that rising health care costs threaten the financial well-being of families across the country,” said Ron Pollack, executive director of Families USA.

The report argues throughout for health care reform, and as Pollack said, if it doesn’t happen soon, more families will be priced out of the market.

In a report last year, Families USA said health insurance premiums grew 5.8 times faster than earnings in Texas. And this year, the growth rate in Texas is even below the national rate in which premiums grew 4.9 times faster than income between 2000 and 2009.

Even so, Pollack said he doubted “anyone in the state will be delighted” by the results this year.

Asked why premiums are growing so fast in Texas and nationally, the report cited four key issues:

    *Increased spending on health care. The report says that nearly half of Americans have chronic conditions, with diabetes alone costing more than $174 billion annually.
    *Lack of regulation of the insurance industry. Insurance companies can charge more, plus refuse coverage to people based on a variety of factors, including dropping or denying people because of illness, the report says.
    *A lack of competition in the insurance market. The report says in some areas, too many companies have merged, leaving consumers with too little choice. The report claims health care reform will provide more options.
    *The “hidden health tax,” in which people with insurance help cover the uninsured. Last year, the portion that insurance companies charged families in insurance premiums to cover people who did not have insurance was $1,017.
    Pollack said he believes insured people would pay less to cover uninsured people under health care reform.

Link to the study by Families USA (pdf).

One thought on “How Tort Reform Can Raise Health Care Costs”

  1. I don’t think you can argue that tort reform raised healthcare costs. Because premiums, just as in Texas, doubled across the entire US over the past decade.

    You could, however, say that tort reform did nothing to contain costs.

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