Health insurance rates are rising by an average of more than 8 percent in Connecticut, tightening the pinch on family budgets and the state's economy heading into 2013.
This month, the state Insurance Department approved rate increases ranging from 5.5 percent for Oxford Health Plans' large employer group to more than 12 percent for Anthem Blue Cross Blue Shield's individual and small business policies. A review of rate increases granted this year shows the average increase is about 8.7 percent compared to 4.6 percent last year.
"It's going to hurt people," said Fred Maidment, a professor of management at Western Connecticut State University in Danbury. "People are having to tighten their belts. Things are not getting better."
Maidment said incomes in the nation and state are basically stagnant, while prices for energy, food and health care all are going up. That means people are having to spend larger shares of their incomes on necessities, which leaves them with less discretionary income. And that's bad news for the economy, he said.
Oil prices remain above $90 a barrel on the New York Mercantile Exchange, while the average price for a gallon of gas in Connecticut was $4.082 Wednesday, up 9 percent from a year ago when it was $3.716, according to AAA's Daily Fuel Gauge report.
Maidment said this should worry retailers hoping for a better holiday season. He does not expect it to be a good one this year, unless people "start to dig out the credit cards again."
Consumers over the last few years have been reducing debt, largely by refinancing mortgages but also by paying down credit cards, according to The Federal Reserve Bank of New York statistics. The only lending that has seen significant increases is for education and automobiles.
Combining the rising costs of health care and energy, and with lackluster wage growth, Maidment does not expect economic growth to continue in 2013.
Anthem spokeswoman Sarah Yeager said in an email Wednesday that the insurer sought higher rates on individual and group policies to cover the rising costs of care, which are growing by double digits in Connecticut.
But, she added, "These factors are exacerbated by the downturn in the economy, as many healthy individuals are choosing not to purchase coverage, to drop coverage or to seek out less expensive coverage."
This month, Anthem got a 12.6 percent increase for its individual health plans, which affects 30,000 policy holders in the state. The company had asked for a 14.6 percent increase, but the department scaled it back after a review found some administrative costs could not be justified.
The Insurance Department also reduced to 12.8 percent Anthem's 13.8 percent increase request for its small employer group plans. In this case, the department said Anthem overstated the impact from the new federal health care standards. The change is expected to affect 36,000 policy holders covering 65,000 employees. Both increases will be effective on Jan. 1, 2013.
United Health'sOxford Health large group plan received 5.5 percent increase that will goes into effect on Nov. 1 of this year and affects 2,678 policies covering 5,867 employees.
Benjamin Goldstein, a United Health Care spokesman, said his company's increase reflects higher prescription drug and medical costs in the state.
"There's only so much money," he said.
In a bit of irony, one of the contributing factors to the rate increase this year, according to one of the insurers, is the difficult economy.