Archive | Insurance Company News – California

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).


California to Open New Health Insurance Program for Individuals with Preexisting Conditions in September

The Managed Risk Medical Insurance Board announced Thursday it plans to begin accepting applications this month and providing coverage to Californians next month in a new health insurance program for individuals with preexisting conditions – one of first major provisions of federal health reform to be implemented in the state.

Preexisting Condition Insurance Plan in California Monthly Premium Rates* Effective through December 31, 2011

Age Band Region 1 Region 2 Region 3 Region 4 Region 5 Region 6
<15 $145 $138 $140 $127 $142 $127
15-29 $199 $195 $201 $180 $200 $181
30–34 $286 $282 $292 $258 $288 $260
35–39 $319 $314 $325 $288 $321 $289
40–44 $337 $332 $344 $304 $339 $306
45–49 $369 $364 $377 $334 $371 $335
50–54 $494 $481 $499 $445 $495 $448
55–59 $627 $608 $624 $564 $625 $567
60–64 $796 $780 $802 $720 $799 $723
65-69 $891 $873 $899 $806 $895 $810
70-74 $939 $920 $947 $849 $943 $853
>74 $995 $975 $1,003 $899 $999 $904

* August 5, 2010

Region 1: Northern 31 counties

Region 2: Valley 14 counties

Region 3: Bay Area 6 counties

Region 4: South Coast 3 counties

Region 5: Los Angeles County Region

6: South 3 counties



San Francisco Chronicle –

Aug. 9: Employers and consumers sorting through their health insurance options may see a bump in their rates next year to account for the potential impact of some of the early elements of the federal health overhaul law, according to some health experts.

Jeff Sher, an independent health insurance agent and consultant in San Francisco, said he’s anticipating employee coverage at mid-size companies to go up 13 percent to 15 percent. “Then we’re supposed to tack on several percentage points for health reform,” he said.

August is a key month for employers to start making decisions about their health benefits because most open-enrollment periods, during which employees select their health insurance plans, begin in the fall for coverage starting Jan. 1, 2011.

While most major pieces of the new health law don’t go into effect until 2014, some reforms affecting health insurance carriers take effect this year. These include provisions that require health plans to cover adult children

until age 26, extend coverage to children with pre-existing conditions, end maximum lifetime spending limits and end the practice of retroactively canceling a member’s coverage for any reason other than fraud.

Health policy watchers say it’s tough to know whether these reforms will have much impact on costs, which routinely outpace increases in wages and inflation. Any savings the new law could offer have not materialized yet, said Laurence Baker, professor of health research and policy at Stanford University. Meanwhile, there is uncertainty about whether changes such as covering children with pre-existing conditions or extending coverage to those under 26 will add costs to the overall health system.

“I can certainly see they (insurers) would look to the future and worry about how things would roll out and be more aggressive in the future about rates,” Baker said. A PricewaterhouseCoopers report released in June found that medical costs nationwide are expected to rise 9 percent next year. That projected increase for 2011 is actually slightly smaller than the 9.5 percent rise the consulting firm is seeing this year.

But Michael Thompson, a principal with PricewaterhouseCoopers, said the reforms going into effect this year will have little to no impact on employer health costs. “If anything, we think the trend will down this year,” he said, adding that the upsurge last year of people staying on their former employer’s health insurance plans due to federal government subsidies had a larger impact on rates.

Several health insurers declined to comment directly on the impact of health reform on their rates. Aetna said people who purchase coverage with additional benefits required under the new health law will have to pay more for those benefits.

California legislators this month will be considering a number of bills designed to curb increases in health rates, such as the 39 percent hike for individual members of Anthem Blue Cross that helped jump-start the national reform discussion earlier this year.

“Regulators need to be vigilant in this period before the health reform kicks in with regards to health insurers gaming the system,” said Anthony Wright, executive director of Health Access, a statewide advocacy group.


First victim of health care overhaul?


A Virginia-based insurance company says “considerable uncertainties” created by the Democrats’ health care overhaul will force it to close its doors by the end of the year.

The firm, nHealth, appears to be the first to claim that the new law has driven it out of business. “We don’t know what the rules are going to be, and, as a start-up, our investors need certainty,” nHealth CEO and President Paul Kitchen told POLITICO. “The law created so much uncertainty that is beyond our control.”

Last week, in a letter to the company’s 50 or so employees, Executive Vice President James Slabaugh said nHealth has stopped accepting new group customers and will terminate all business by Dec. 31.

“The uncertainties in the regulatory climate coupled with new demands imposed by national health care reforms have made it challenging to sustain the level of sales required to remain viable over the long run,” Slabaugh wrote.

The company’s finger-pointing — first reported by the newspaper Richmond BizSense — must be read with caution: For years, employers and health insurance brokers have struggled to keep pace with steeply rising health care costs.

Asked about nHealth’s decision to shut down, a White House aide said, “It’s difficult to comment on this case without fully evaluating the company in question.”

The blame game — whether health reform can be held responsible for the continuing woes of an already struggling system — will very likely become a familiar plotline as the health overhaul takes effect and political parties vie for control of the narrative.

President Barack Obama dives back into the fray Tuesday, traveling to a senior center in Wheaton, Md., for a national tele-town hall on health care.

NHealth opened for business about 2½ years ago and was named in October 2008 one of the “Greater Richmond Companies to Watch” by a local business group. Kitchen estimates the company has about 100 small-business contracts providing policies to “thousands” of subscribers.

NHealth specializes in high-deductible insurance plans, meant to cover larger medical emergencies, that are paired with health savings accounts, the tax-deductible accounts used to pay for medical expenses.

HSAs have grown dramatically since they were authorized in the 2003 Medicare Prescription Drug Improvement and Modernization Act. There were about 1 million enrollees in 2005. Now there are about 10 million, according to a May 2010 report from the industry group America’s Health Insurance Plans.

HSAs are a favorite of conservative health economists, who see the plans as a way to control costs by leaving spending decisions to individual consumers. Others have criticized the plans as discouraging cost-saving behavior such as preventive care.

In an interview with POLITICO, Kitchen said the impact of health reform on his business is twofold.

First, it created an uncertain future. With regulations yet to be written and rules constantly forthcoming, he said, “everything felt beyond our control.”

Second, Kitchen is apprehensive about a more regulated insurance market. The health reform law requires insurance companies to spend a certain amount of premium dollars on medical costs and, in many cases, bans lifetime limits on medical coverage. Kitchen said he was uncertain whether nHealth would be able to comply.

“The rules changed in the middle of the game,” Kitchen said. “We’re not willing to wander into that environment.”

The White House aide agreed that the rules will change, but in ways that benefit consumers. Stricter regulations will ultimately guarantee better coverage for subscribers. The medical loss ratio regulation, for example, will ensure that insurers spend a certain percentage of subscriber dollars on medical costs rather than administrative expenses.

“The Affordable Care Act sets new standards for insurance coverage that protect consumers and ensure they get the most for their premium dollar,” the aide said. “Insurers should have no problem meeting those standards, which do not require action until 2012. And starting in 2014, the insurance industry will have millions of new customers.”

Even without the health reform law, small health insurance firms were operating in a financially challenging landscape. Employers have become increasingly likely to consider dropping coverage as premiums have risen, according to annual surveys by the National Small Business Association. As far back as 2008, a Citigroup survey showed “more insurers were raising premiums at a faster rate than those who reported slowing increases,” according to a Wall Street Journal article at the time


In California, Exhibit A in Debate on Insurance

New York Times February 16, 2010

LOS ANGELES — When Bernhard Punzet opened the dreaded envelope from Anthem Blue Cross one recent Saturday, it ruined his weekend.

Although he had no known medical problems, the company was raising the premium on his individual health insurance policy by 34 percent, to $254 a month. The policy for his partner, who is 12 years older, would rise 36 percent, to $369.

“Ten percent I could have rationalized,” said Mr. Punzet, 34, a financial controller for a Los Angeles recruiting firm. “But a 34 percent increase? I don’t even have any data points for that, nothing to compare it to. I’ve never seen anything go up 34 percent.”

With health care negotiations stalled in Washington, the Obama administration is seizing on the seething fury felt by Mr. Punzet and nearly 700,000 other Anthem customers in California who have received notices of increases that average 25 percent. About a quarter of them are seeing leaps of 35 percent to 39 percent, the company said, at least four times the rate of medical inflation.

At a moment when the health care debate seemed drained of urgency, the rate increases have permitted Mr. Obama to remind Americans of what is at stake, not just for the uninsured but for those whose coverage is threatened by unregulated hyperinflation.

The spike in Anthem’s premiums, Mr. Obama warned last week, were “just a preview of coming attractions” if the country failed to overhaul its health insurance system.

But if Anthem was the whipping boy the White House needed, the confrontation has also reinforced an emerging shift of focus in Washington from the need for universal coverage to the need for serious cost control. And it brought into clear relief the deep rift between the administration and the insurance industry concerning a central question: whether such unsustainable pricing is driven by the bloodless economics of risk or a corporate culture of greed.

Recognizing a no-lose proposition when they see one, politicians in Sacramento and Washington chastised Anthem relentlessly last week, and hearings are scheduled in both capitals. On Saturday, Anthem’s parent company, WellPoint Inc. of Indianapolis, agreed to a request from California’s insurance commissioner to delay the increases by two months, to May 1, so he could determine whether they comply with loss-ratio regulations.

Health and Human Services Secretary Kathleen Sebelius challenged the company to justify its “extraordinary” rate increases and, when it did in a five-page letter, volleyed that she was not satisfied. She expressed indignation that some of Anthem’s increases would be up to 15 times the rate of inflation, and that WellPoint had earned $2.7 billion in the fourth quarter of 2009.

“Too many Americans are at the whim of private, for-profit insurance companies who are raking in billions in profits each year,” Ms. Sebelius wrote on the White House blog.

She did not mention that most of WellPoint’s fourth-quarter surge came from the one-time sale of a business unit or that Anthem lost money on the individual market in California last year, as company officials assert. California’s insurance commissioner, Steve Poizner, said Saturday that he had a “healthy skepticism” about the claim.

Although Anthem, the state’s largest for-profit insurer, has seemed outmaneuvered by the White House so far, it has tried to transform its defensive position into a teachable moment.

In statements and letters, Anthem and WellPoint have explained what the industry calls a recessionary death spiral: as unemployment and declining wages prompt healthy people to drop their insurance, the remaining risk pool becomes sicker and more expensive to insure, which in turn forces up prices and pushes more people out of the market.

A study released this week found that the five largest health insurance companies collectively lost 2.7 million customers last year, including 1.4 million by WellPoint. Yet they reported record profits of $12.2 billion.

The death spiral “highlights why we need sustainable health care reform to manage the steadily rising costs of hospitals, drugs and doctors,” Anthem, which is based in Los Angeles, said in a statement.

To many in recession-racked California, however, the Obama administration’s populist rhetoric has sounded pitch perfect.

“As a trial lawyer, I’d make it Exhibit A,” said Joshua C. Needle, 57, of Santa Monica, whose premium is rising 33 percent. “I have no problem with profits, but they’re maximizing profits without any concern that they have a captive audience.”

Mr. Needle, like many of the 13 million Americans who buy insurance individually rather than through employers, cannot shop for a better deal because he has medical conditions like high cholesterol and glaucoma that would probably disqualify him with other carriers.

Once accepted by an insurer, consumers cannot be dropped for medical reasons. But in California, where Anthem controls more than half of the individual market, regulators have little power to prevent insurers from raising individual rates as high as the market will bear. That often forces consumers to move to less-generous policies with higher deductibles in order to hold down their costs.

Mr. Poizner, who is running for governor in the Republican primary, has hired actuaries to study whether Anthem is spending at least 70 percent of premium revenues on claims, as required by state regulations. WellPoint officials said they were confident that Anthem exceeded the threshold.

In the health care bills that have passed each chamber, but not been reconciled, Congressional Democrats would attack the cost of premiums in several ways. Everyone would be required to have health insurance, spreading risk among larger pools. Health insurance marketplaces, or exchanges, would force insurers to compete more transparently. Insurers would be prohibited from denying or canceling coverage because of medical conditions, and would be forced to spend at least 80 percent of premiums on claims.

Paradoxically, since WellPoint has lobbied vigorously against the legislation, the company argued last week that its “unfortunate but necessary” rate increases demonstrated the need for a major fix.

But the company found fault with the Democrats’ proposals, particularly what it sees as soft enforcement of a health insurance mandate that would allow millions of people to remain uninsured. Only if everyone is covered, the insurance industry argues, can it spread its risks sufficiently to stop rejecting those with pre-existing conditions.

“The reform being discussed in Washington will not do anything to address the underlying increases in costs,” said Brian A. Sassi, president of consumer business for WellPoint.

Medical costs have typically risen by 5 percent to 10 percent during each of the last five years. Mr. Poizner said he was starting to see significant increases for individual policies sold by some of Anthem’s competitors, and double-digit increases have been reported in other states.

Several insurance analysts said it was possible, but not necessarily likely, that such increases would become common, at least while the economic downturn persists. Insurance brokers in Los Angeles said they had never seen jumps of such magnitude.

“It’s more astonishment than irritation,” a Pasadena broker, John W. Barrett, said of the reaction from his customers. “Irritation was last year and the year before. Now they’re astonished.”


Sebelius, WellPoint Continue Battle Over California Rates

Published 2/12/2010

WellPoint Inc. (NYSE:WLP) says the cost of providing individual health insurance in California is soaring, but a federal regulator says the company should be using its national profits to hold down premium increases.

Anthem Blue Cross of California, a unit of WellPoint, Indianapolis, recently announced that it would be increasing premiums for some California individual health insurance customers by as much as 39%. The increases are set to take effect March 1.

California Insurance Commissioner Steve Poizner asked Anthem to postpone the increase, to give an independent actuary time to verify whether the increase is justified.

Kathleen Sebelius, the U.S. secretary of Health and Human Services and former Kansas insurance commissioner, wrote to ask Anthem Blue Cross executives for an explanation of the increase, and she suggested that the proposed increase shows why the United States health reform.

Now WellPoint and Sebelius have fired off new letters.

Brian Sassi, president of the consumer business unit at WellPoint, writes to Sebelius that WellPoint’s profit margins in California are a little lower the profit margins of competitors in the state.

Anthem earned $12.62 per member per month in 2008, compared with an average of $1.845 per member per month at one nonprofit competitor and $13.22 per member per month at another.

Only about 10% of Anthem’s health insurance customers in California are individual health insurance policyholders, and the proposed 39% increase that is getting most of the media attention affects a relatively small percentage of individual policyholders who insist on sticking with their current policies and will be changing age categories, Sassi writes.

“The rate changes excluding the impact of age-category changes range from a 20.4% decrease to a 34.9% increase,” Sassi writes.

Many individual insurance policyholders can reduce the effects of the proposed premiums increases by changing products, Sassi adds.

WellPoint welcomes the California Department of Insurance review of the rate increases and believes it can show why the increases are actuarially sound and necessary, Sassi writes.

“Rate increases reflect the increasing underlying medical costs in the delivery system, which are unsustainable,” Sassi writes.

Overall health insurance rates are increasing because of factors such as increases in provider prices and the aging of the population, but other factors are accounting for the rapid increases in the California individual health insurance market, Sassi writes.

When the economy is bad, only the sickest individuals choose to keep paying for individual health coverage, and that means the insureds remaining in the pool use more services, Sassi writes.

Meanwhile, Sassi writes, the healthier insureds who are keeping their coverage are migrating toward the cheaper, higher deductible policies, and that makes the risk profile of the insureds who are sticking with the lower-deductible policies look even worse.

“Other individual market health insurers are facing the same dynamics and are being forced to take similar actions,” Sassi warns.

To prevent antiselection in the individual health insurance market, WellPoint believes that Congress must require all Americans to have some kind of health coverage, provide subsidies for people who have serious trouble paying for coverage, and impose significant penalties on individuals who go without coverage, Sassi writes.

Sebelius does not discuss the state of the California insurance health insurance market in her reply, but she notes that WellPoint as a whole reported $2.7 billion in net income for the fourth quarter of 2009.

“It remains difficult to understand how a company that made $2.7 billion in the last quarter of 2009 alone can justify massive increases that will leave consumers with nothing but bad options: pay more for coverage, cut back on benefits or join the ranks of the uninsured,” Sebelius writes. “High health care costs alone cannot account for a premium increase that is 10 times higher than national health spending growth.”

The Anthem decision to raise rates demonstrates the need for reforming the health insurance system, Sebelius writes.

“Reform will end the worst insurance company practices and put doctors and patients — not insurance companies — in charge of medical decisions,” Sebelius writes. “If we fail to implement reform, insurance companies will continue to prosper while families will continue to struggle