Will health insurance premiums continue to rise? Yes. Here’s why.

In the health care industry, the dirty words are “cost-shifting”. You don’t get what you pay for. With health care, you pay for what others get. Because of cost-shifting, you end up paying for the health care costs incurred by other people.

In the U.S., five percent of Americans consume nearly 50 percent of the $2.5 trillion dollars spent on health care annually. One percent of the population consume 20 percent of all costs. In contrast, 50 percent of the population are responsible for only 3 percent of all health care expenditures. It’s this 50 percent group who spend the least who can expect premium costs to escalate.

Physicians, hospitals, and other healthcare providers are paid different amounts for the same service. What determines the amount is who the payor is. Who pays the bill? To illustrate, a doctor sees three patients for a 15-minute visit each. After the patient leaves, her office manager submits a claim for each of the patients to their insurance companies. Weeks later, the physician receives three checks. One payment is $120. A second payment is $80. Finally, the third payment is received. To the physicians shock and dismay, the payment is $45. In this example, the $45 dollar payment is from Medicaid.

With the new health care law, beginning 2014 millions of individuals will qualify for Medicaid. Estimates forecast that Medicaid rolls will swell by 30 percent, adding 16 million more Medicaid insured patients to a health care system on life support. As a result, we can anticipate more cost-shifting. More cost-shifting translates to higher premiums for employers, small business owners, and workers. Now those are certainly dirty words.