Insurers Face Questions Over Rates for Safety-Net Plans

Premiums for some policies Blue Shield of California offers are up to 55% higher than rates set by the state, and premiums for similar types of policies Anthem Blue Cross of California offers are 36% higher than the state-issued rates, a Los Angeles Times investigation found.

Under the federal Health Insurance Portability and Accountability Act, health insurers must offer coverage through their most popular plans to people who are no longer covered by COBRA.

COBRA lets people pay for the health insurance policy they had through their employer for up to three years after leaving or losing a job.

In addition, a 2001 state law prevents insurers from setting premiums for such coverage above the "average premium paid" by people covered through California's high-risk insurance pool, which is administered by the state Major Risk Medical Insurance Program.

For purposes of the state law, Sarah Soto-Taylor, spokesperson for MRMIP, said that the program has provided the Departments of Managed Health Care and Insurance with weighted averages for premiums, taking into account the number of policies MRMIP administers in each region of the state and the age range of each policyholder buying coverage through MRMIP. 

State Regulators Respond

To date, state insurance regulators have not taken action against an insurer over rates for HIPAA coverage, but they have now began inquiries into the rates. The reviews are ongoing.

According to the Times, state regulators said they had not reviewed premiums for HIPAA policies "for years."

Lynne Randolph, a spokesperson for the California Department of Managed Health Care, said "If people are being charged more than they should be, especially in this time of economic crisis, then the Department of Managed Health Care is going to be getting down to the bottom of it. And it could include an order to reimburse customers."

After an initial review, DMHC informed Blue Shield that its rates might not comply with the state law.

Blue Shield Defends Position

Blue Shield defended its rates, saying it had used a straight average -- rather than a weighted average -- that regulators had never objected to.

A 2004 e-mail to the Department of Insurance from a Blue Shield attorney explained the health insurer's methodology, and the Times reports that there is no evidence that the department responded to Blue Shield's e-mail.

Blue Shield spokesperson Tom Epstein said the company would recalculate its rates if the state required it.

Anthem Blue Cross Response

Anthem Blue Cross spokesperson Peggy Hinz said the company reviewed their rates in response to the Times' investigation.

The insurer found that it has been overcharging members of HIPAA plans ages 60 to 64 since 2006. In addition, Anthem said it appeared other people had been overcharged.