INDIVIDUAL COVERAGE: Major Carriers Plan Big Rate Increases
The Sacramento Business Journal reports that rates for individual health insurance policies are increasing by as much as 66%. Blue Cross of California notified policyholders that "rates for individual policies will rise by up to 58%," while Health Net has already implemented rate hikes of "as much as 66%." Meanwhile, Blue Shield of California is planning to raise individual rates in January, in addition to rate hikes implemented earlier this year. John Bertko, a consultant with Reden & Anders in Berkeley, said several factors are impacting individual market rates. First, he said "hospital systems have grown powerful -- and after being squeezed for years by health plans they are fighting back, demanding higher payments for the care they provide" (see past CHL coverage). Second, Bertko noted that health care costs "in general are trending upward." The Business Journal also notes that the individual market "is one of the last bastions where strict underwriting practices are allowed in California health insurance," allowing insurers to "base an individual's rates on where and how he or she lives, along with a long list of other factors."
According to the Business Journal, the "timing" of the latest rate increases "suggests some insurers are going after the little guys following bruising rate negotiations with hospital systems." But a Blue Cross spokesperson denied any connection, saying, "This is not connected to recent provider contracting issues. The timing is purely coincidental. The increase has been planned since the end of last year." The Blue Cross rate hikes, ranging from 8% to 58%, will impact 367,000 Californians who hold Prudent Buyer plan policies. Blue Cross blamed the higher Prudent Buyer plan rates on rising medical and pharmacy costs, as well as "higher-than-expected use of the coverage." Blue Cross' individual coverage holders also face higher copayments for outpatient services and mail-order prescription drugs. Some are critical of the Blue Cross rate hikes, noting that the insurer's parent company -- Woodland Hills-based Wellpoint Health Network -- "continues to do well financially."
The higher rate hikes aren't causing a large number of individual policyholders to drop their coverage. Sacramento-based health insurance broker Dale Waters said, "We haven't seen people dropping out [of Blue Cross]. It's a captive market and there's not many places to go." Blue Cross is "tinkering" with its Prudent Buyer plan. Spokesperson Elise Anderson said, "It's a fairly new plan and we found we underpriced it. There's no deductible and people are using hospital services more than we thought. Therefore, we needed to increase rates." Meanwhile, Health Net has halted sales of individual policies and "is working to unveil a new product next year." The Business Journal notes that Kaiser Permanente is one of the three largest individual policy carriers in the state, but officials were not available to comment on the health plan's expected rates in this market (Robertson, 8/24 issue).