Statistics and How to Think about Large Differences

The State of Oregon appears to be the first to show projected changes in ACA-compatible individual insurance policies for 2016. I have listed them below in order of smallest to largest increase.

Kaiser Foundation Health Plan of the Northwest           -1.9%

Trillium Community Health Plan, Inc                                 5.0%

Oregons Health CO-OP                                                        5.3%

Providence Health Plan                                                       8.7%

Health Net Health Plan of Oregon, Inc                              9.0%

Regence BlueCross BlueShield of Oregon                   12.3%

BridgeSpan Health Company                                           15.0%

ATRIO Health Plans                                                            18.4%

Moda Health Plan, Inc.                                                       25.6%

Health Republic Insurance Company                             37.8%

LifeWise Health Plan of Oregon                                       38.5%

PacificSource Health Plans                                              42.7%

Time Insurance Company                                                  52.0%

Oregon is a state that has been most supportive of the ACA. The average such policy in Oregon in 2015 was 2% lower than in 2014. Clearly, the chickens have come home to roost in 2016 as these rates are all (except Kaiser) well above any measure of inflation. Moreover, nearly all of the providers increases are double the inflation rate, with Time Insurance likely 12 times an inflation rate.

I would like to comment particularly on these higher rates. One way that we consumers are often “tricked” by companies or government providing us products or services is that they have one year with a massive cost increase. They may then follow on with several years of no or very low price increases.

We are lulled into thinking the company that followed a 45% increase with years of 0, 2, 5, 0, and 2 are offering us a deal! Our perception is that the company with an 8% increase for six straight years is sticking it to us. The latter stream of cost increases is nearly 10% less in the 7th year than the first set. I used 45% as the example because that is about what the UNC system average was for all 16 campuses when the policies required of students were brought into ACA compliance. That 45% increase is behind us, so the increase in years since then may not seem so bad. Oregon residents have an option that students generally don’t in that the former can change health insurance providers from one year to the next (which may mean changing doctors, changing hospitals, etc.).

So, if you pay a 20% increase one year for any product or service, don’t forget that the base price is now at a much higher level, for any subsequent rate changes. Always beware if an investment company boasts that they have had an average return of 16.2% annually for the past 6 years. Definitely look into how they did 7 years ago. If you are reading the sports page and you see that the Muskrats have won 3 national titles in the past 11 years, check to see how long ago, if ever, they won a fourth. You have probably heard the expression there are lies, damn lies, and then statistics. One of the reasons statistics can be used to “prove” almost anything is because they are used in a way that is intellectually dishonest. Statistics provides an incredibly important set of tools when used honestly.

So, if some day you read that health insurance has gone up very little in the past few years for UNC System students, remember to average in the 45% increase just before that.

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