Health premium increases meet resistance

by Victoria Colliver, San Francisco Chronicle

Hundreds of thousands of Californians covered by the state’s largest health insurers are facing double-digit premium hikes, and regulators and consumers are pushing back.

On Thursday, the state insurance commissioner said Blue Shield of California’s proposed health premium increases – averaging 11.7 percent for most policyholders, but nearing 20 percent for some – were unreasonable.

"California’s health insurers are proposing double-digit increases in spite of the fact the data doesn’t support them," said Insurance Commissioner Dave Jones. He said the department’s review of the March 1 increases for 268,000 individual policyholders showed Blue Shield overestimated how much medical care its consumers would use.

A day earlier, the Department of Managed Health Care, the state’s other health insurance regulator, deemed rate increases by both Blue Shield and Aetna to be unreasonable.

Blue Shield’s 11.8 percent increase, which went into effect March 1, affects 27,000 individual policyholders while Aetna’s 11.4 percent increase is scheduled to be imposed on 20,000 small-business customers on April 1. In addition, Aetna is seeking premiums averaging nearly 19 percent higher for about 70,000 individual policyholders that, once approved, will also go into effect April 1.

Long string of increases

Health insurers in recent years have hit consumers – particularly those who buy their coverage as individuals or who are covered through small-business plans – with stunning rate increases that were met, like this time, with considerable pushback from consumers and regulators. The insurers say increasing medical care costs driven by doctors, hospitals and expensive new technology have justified their actions.

But this round of requests is especially sensitive in light of the fact that, starting Jan. 1, most Americans will be required to buy health insurance, and insurers will not be able to charge higher rates or reject applicants based on their medical history.

"What we’re seeing is advance of health reform – when, come Jan. 1, insurance companies have to take everybody – insurance companies are jacking up rates to push consumers into lower-benefit policies," said Jerry Flanagan, lead staff attorney with Consumer Watchdog.

Flanagan’s group is suing Blue Shield on behalf of consumers, alleging the nonprofit San Francisco insurer is violating state law and committing fraud by pushing customers out of some plans by giving them the choice of paying much higher rates or going into another policy with lower rates, higher out-of-pocket costs and skimpier benefits.

Critics’ claims rejected

Health insurers, for their part, said they are doing nothing of the sort.

Blue Shield spokesman Steve Shivinsky rejected the accusations. "The rate increase we announced is an accurate reflection of the costs we’re projecting for 2013 expenses," he said.

Shivinsky said health insurers aren’t the problem when it comes to rising medical costs. "If you want to look at what’s driving costs it’s the rising cost of delivering the care. It’s the cost of hospital, pharmaceutical care, the cost of (medical) implants," he said. "The percentage of costs that can actually be attributed back to the insurer is minimal."

But to consumers like Philip Brouwer, a claimant in the lawsuit against Blue Shield, that reasoning doesn’t make sense. He was hit with a 29.7 percent increase when he turned 60 in July, followed by another nearly 20 percent increase later the same year.

"I don’t believe for a moment Blue Shield is a nonprofit," said the Los Gatos resident. "It’s a hugely profitable formula they’ve got going on."

Regulators lack teeth

Despite the protestations by California’s health insurance regulators, little more than public shaming may come out of the efforts. In California, the regulators lack authority to reject or modify rates.

Still, some insurers, in the face of scrutiny, have agreed to drop proposed increases or reduce the increases. Anthem Blue Cross last month said it would scale back a proposed increase of nearly 18 percent to just below 14 percent for 630,000 members.

A ballot initiative, which is backed by Consumer Watchdog and scheduled for the November 2014 ballot, would give state regulators the authority they lack. On a similar track, Sen. Dianne Feinstein, D-Calif., on Wednesday proposed federal legislation that would give power to federal health officials to act upon rate increases in states that, like California, haven’t given their regulators the clout to turn back the proposed increases.