Premiums for Safety-Net Health Plans Rise With State Approval

State regulators are allowing insurance companies to raise maximum premiums for Californians with safety-net health insurance, the Los Angeles Times reports.

Approximately 20,000 California residents could experience premium increases of up to $7,500 annually, which could increase their insurance bills to nearly $25,000 annually.

Affected consumers could face the higher premiums until 2014, when the federal health reform law bans insurers from dropping patients based on pre-existing conditions.

Safety-Net Coverage

The federal Health Insurance Portability and Accountability Act requires insurers to provide health insurance to individuals who have lost employer-sponsored coverage and are ineligible for other health plans because of pre-existing medical conditions. The program is available to residents who have exhausted their COBRA benefits.

Background on New Rate Limits

In 2000, California legislators passed a law capping premiums for safety-net insurance. However, the legislation did not outline how the limits would be calculated. As a result, state regulators and major safety-net insurers designed separate formulas that generated different rate configurations.

To reconcile the different formulas, the state Department of Managed Health Care hired an outside actuary to develop a uniform calculation. However, the new formula increased the maximum premium rates for the majority of consumers, particularly for individuals between ages 50 and 64.

Anthem Blue Cross applied the new safety-net rates in January 2010, and Blue Shield of California followed suit a month later. The rate increases received little attention until this spring, when legislators debated a bill (AB 718), by Assembly member Bill Emmerson (R-Redlands), that would have codified the new rate cap formula into law.

The Assembly passed the measure, but the Senate Health Committee rejected it.

Advocates, State Officials Respond

Some health advocates argue that the state's continued high unemployment level could force more residents to resort to safety-net coverage.

Lucien Wulsin, executive director of the Insure the Uninsured Project, said higher costs for safety-net insurance could prompt some patients to drop coverage altogether.

Lynne Randolph, DMHC spokesperson, said the rate hikes are an "unfortunate consequence" of the new uniform formula. However, she noted that the department is "pursuing a formula for consumers to bring down rates as much as possible" (Helfand, Los Angeles Times, 9/1).