Health insurance hikes hit small US businesses

While Anthem Blue Cross has been taking the heat for proposing rate increases of up to 39 percent on individual consumers, other health insurers have stunned some small businesses with hikes that in some cases exceed 75 percent.

Tom Simmons, president of an Oakland design and consulting firm with four employees, said he had just read about the Anthem increases when he opened a letter from his insurer, Blue Shield of California, informing him his monthly family premium would go up to $1,596 a month from $908, a nearly 76 percent increase.

“This industry is getting out of control. It makes me fearful of future years and what could become of things if something doesn’t change,” said Simmons, whose business health insurance policy also covers his family of three.

He ultimately was able to reduce the increase to about 16 percent, but only after switching to a plan with a higher deductible and other higher out-of-pocket expenses.

California health premium increases have taken center stage on both state and national levels since earlier this month, when Anthem Blue Cross informed many of its 800,000 customers who buy policies independently that their rates would go up by as much as 39 percent.

Anthem’s increases prompted a state Assembly committee hearing as well as congressional testimony by top executives this week, and they were mentioned during President Obama’s health summit Thursday.
Brown investigates

Also Thursday, state Attorney General Jerry Brown subpoenaed financial records and other documents from California’s seven largest health insurance companies. In addition to Anthem, they include Aetna Health, Cigna, Health Net, Blue Shield, Kaiser Permanente and PacifiCare.

Brown’s office said the investigation will look into whether Anthem’s rate increases are legal under California law and whether the other health plans are planning similar rate hikes.

Meanwhile, businesses in the small-group market – those with fewer than 50 employees – are reeling from the latest spikes in their health rates.

Those who reported the highest rate increases appeared to have a high deductible Blue Shield policy paired with a savings account.

These policies, known as health savings accounts, or HSAs, were created by the Bush administration in 2003 as way to trim health costs. The policies are supported as a market solution to rising health costs because they require members to pay more of their medical expenses out of pocket to use fewer services.

Blue Shield officials said the company’s lack of experience with these types of plans combined with the poor economy compelled them to raise rates, primarily affecting three HSAs.
‘Paying out more’

“We were paying out more in claims than we were collecting in premiums,” said Aron Ezra, spokesman for Blue Shield, which is a nonprofit insurer based in San Francisco. Ezra said he didn’t know how large the increases were or how many customers were affected.

Ezra said Blue Shield regrets having to raise rates.

“We lose membership because fewer people can afford to get it,” he said. “It does not help us. We only do it to be able to collect enough money to pay out.”

California insurance experts say other health insurers have had to raise their small-group rates, particularly for HSAs.

“Every carrier has been mispricing the product because we don’t have the data,” said Steven Lindsay, a lobbyist for the California Association of Health Underwriters and an insurance broker.

Several brokers suggested that some insurers, like Blue Shield, priced the plans low in an effort to be competitive with other insurers.

Jay Laude, an independent insurance broker with McDermott Costa Insurance Brokers in San Leandro, described the plans as “awesome” for consumers, but too low to cover costs.

Source: SFGate