Rates rising yet again to reflect changes mandated by the new federal health overhaul law as well as state reforms that will go into effect
SF Gate, Victoria Colliver, Dec 9, 2010
Some health insurers are bumping up rates yet again to reflect changes mandated by the new federal health overhaul law as well as state reforms that will go into effect Jan. 1.
Blue Shield of California, for example, has sent letters informing customers with individual policies that their premiums will go up in the low single digits because of the federal law.
Some of those same policyholders also could see their rates go up as much as an additional 17.7 percent to account for a new state law that will prohibit insurers from charging women more for insurance than men.
For consumers, many of whom already have been hit this year with hefty premium increases to accommodate higher medical costs, the additional raise attributed to health reform will further strain their budgets.
Scott Morgan, a Blue Shield customer in San Francisco, saw his premium rise by 29 percent in June, so he was stunned to get another rate increase, this time for 34 percent. That means the same coverage he was paying $335 a month for at the end of May will cost him $581 a month come January.
"The federal reform is going to add 3.4 percent. That's fair. But do I believe that means my rates should go up another 30 percent above that?" said Morgan, 52, a self-employed consultant for corporate meetings. "I think what they're doing is they're getting their licks in while they can."
Since the federal health care overhaul legislation was passed in March, several provisions have taken effect, including the elimination of lifetime and some annual coverage limits. Children are allowed to stay on their parents' health policies until the age of 26 and insurers can no longer deny coverage to children with pre-existing health conditions.
Starting next year, insurers in the individual and small group markets will be required to spend at least 80 percent of their premium dollars on medical care, while those covering large groups will have to spend a minimum of 85 percent on those purposes.
On the state level, a law taking effect Jan. 1 will ban the practice known as "gender rating," in which women were typically charged more than men for health insurance. While women tend to use more services in their younger years, the difference often evens out as people age.
"The new federal law that applies to policies written after Oct. 1 does incur costs," said Patrick Johnston, president and chief executive officer of the California Association of Health Plans, the trade group for the state's insurers. "Those are in the range of 3 percent to 10 percent, varying with the policy and the purchaser."
Blue Shield has calculated the reforms under the federal health law will require premiums to go up more than 4 percent for some policies.
About 80 percent of Blue Shield's 340,000 individual policyholders are getting a rate change effective Jan. 1 - and about a third of those members already had a change in October, said Tom Epstein, a vice president with the San Francisco health insurer. While the vast majority will get an increase, some will actually see their rates cut, he said.
"We do not expect to make any money in the individual market this year, despite these rate increases," he said.
Consumer groups say it's unfair to use health reform to justify rate increases.
"These types of rate increases have been happening for years now," said Sondra Roberto, staff attorney with Consumers Union. "We really need more scrutiny in how they're coming up with these rate increases."
Premium increases proposed this year by Anthem Blue Cross of as much as 39 percent in the California individual market not only jumpstarted the debate over the federal health law but also prompted increased scrutiny by state regulators as well as a new state law designed to add a layer of consumer protection.
In addition, federal regulators have called for state and federal reviews of "unreasonable" rate increases, but have yet to define what such an increase is.
"Beyond unaffordable" is how another Blue Shield customer, Terry Seligman, described the 4.83 percent rate increase she will have to pay on Jan. 1, which comes on top of the 13 percent hike she's paid since Oct. 1. The combined increases reflect a jump in premiums of nearly 19 percent since Sept. 30.
"I never thought I'd be happy to say this, but next year I'll be on Medicare," said Seligman, 64, who runs a travel insurance business in San Francisco and has been a Blue Shield customer for 26 years. "And not a moment too soon."
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