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California's safety-net health insurance premiums rise
State regulators have quietly given insurers permission to raise maximum
premiums for most of the 20,000 who depend on the coverage of last resort. Some
are paying an extra $7,500 this year.
By Duke Helfand
Los Angeles Times Staff Writer
As state leaders blast giant health insurers for raising rates, Gov. Arnold
Schwarzenegger's administration has quietly allowed hefty increases for
thousands of sick or jobless Californians who must rely on expensive safety-net
coverage -- if they want insurance at all.
To the frustration of
policyholders, state regulators have given insurance companies permission to
raise maximum premiums for most of the 20,000 Californians who depend on the
coverage of last resort. Some who buy the insurance will have to pay an extra
$7,500 annually, pushing their bills to nearly $25,000.
Healthcare
advocates say that continued high unemployment in California could drive up the
ranks of people in this high-risk pool who have no other options for protecting
themselves against catastrophic medical expenses.
These vulnerable
consumers could face higher-than-anticipated costs until at least 2014, when the
nation's new healthcare law will require private insurers to cover all comers
regardless of their health histories.
For now the state's move has been
painful for policyholders such as Richard Sevin and his wife, Mardy Wasserman,
of La Canada Flintridge.
Both 60 and unable to buy less expensive private
insurance because of preexisting health conditions, they are digging into their
savings to pay their nearly $17,000 bill this year. That's about $1,400 more
than they would have paid under a rate cap system that was replaced in
January.
When they factor in the cost for their 11-year-old twins, both
on conventional private insurance policies, their family tab will exceed $19,000
this year.
"It is a tremendous burden," Sevin said.
Regulators
with the state Department of Managed Health Care, an arm of the Schwarzenegger
administration, say the rate hikes are regrettable but unavoidable. They say the
increases are the result of a move to correct a much-criticized system for
calculating maximum premiums that had led to unpredictable cost
fluctuations.
Officials said they had little authority in the past to
stop insurers from overcharging because the state law that established the rate
caps was vague and unenforceable.
"These rate increases are certainly an
unfortunate consequence," department spokeswoman Lynne Randolph said. "They were
not our intention when we set out to solve this problem. The department is
pursuing a formula for consumers to bring down rates as much as
possible."
Critics of the new approach say it could have a devastating
effect on an already strained population.
"When you buck up rates, more
and more people who need insurance can't afford it," said Lucien Wulsin,
executive director of Insure the Uninsured Project in Santa Monica. "A portion
of them are going to drop coverage and have no protection for their healthcare
needs."
At issue are safety-net provisions of the federal Health
Insurance Portability and Accountability Act. The law requires insurers to offer
coverage to people who have lost their job-based insurance regardless of
preexisting medical conditions that could exclude them from coverage in the
private market.
The program kicks in once consumers exhaust COBRA, a
separate federal law that allows people to maintain their employer-sponsored
health insurance -- as long as they pick up the full cost -- for 18 months once
they leave or lose a job.
Concerned with the soaring costs of the
safety-net insurance, California lawmakers passed a law in 2000 that sought to
cap premiums. But the law did not specify how the limits would be
calculated.
As a result, regulators and California's two largest
safety-net insurers -- Anthem Blue Cross and Blue Shield of California -- came
up with separate formulas, each producing a different rate
configuration.
Policyholders sued Blue Shield and Anthem last year,
accusing the insurers of exceeding the state's caps. A judge in one case ordered
Anthem to refund a Los Angeles man more than $7,000. The two other cases, one
against Anthem and the other against Blue Shield, are pending.
The
state's own formula, meanwhile, had problems of its own, producing rate
fluctuations because of the relatively small number of people in its
calculations.
Seeking to resolve uncertainty over the various formulas,
the managed-healthcare department hired an outside actuary to review them. State
officials said the actuary developed a uniform calculation -- based on a larger
number of enrollees -- that led to reliable rates with gradual
increases.
The downside was that the formula also pushed up the maximum
price tag for the majority of consumers, particularly for those ages 50 to 64,
the largest group in the high-risk pool.
Still, the managed-healthcare
department last fall asked Anthem and Blue Shield to use its new formula for
2010. Anthem applied it in January. "It was the appropriate thing to do," a
spokeswoman said, without elaborating. Blue Shield followed in February, saying
a single formula would make the rates more consistent for everyone.
The
state's new limits went almost unnoticed until the managed-healthcare department
asked the Legislature to make the rate cap formula permanent. A bill (AB 718)
passed the Assembly in May but was blocked this month in the Senate Health
Committee, whose chairwoman objected to saddling already burdened consumers with
additional costs.
"While I appreciate the administration's efforts to
clear up ambiguity in the law, my committee's careful analysis of the
information provided suggested that the formula in the bill would likely result
in a higher rate for more people than the previous formula," Sen. Elaine Alquist
(D-Santa Clara) said.
"Since this is safety-net healthcare," she said, "I
was not comfortable with the idea of raising rates during these tough economic
times."
A Schwarzenegger spokeswoman defended the method put forward by
regulators.
"We are disappointed the Legislature did not accept the
department's proposal to smooth out rates and adopt a more predictable formula,"
Rachel Arrezola said.
Regulators point out that Anthem and Blue Shield
have both agreed to continue following the state's preferred method in 2011. "We
think we have the right formula here for everybody," said Tim Le Bas, an
assistant deputy director in the managed-healthcare department.
But some
critics say the state's new rate caps, however benignly conceived, will be
costly for policyholders who have no other options.
"This could be
terrible for some subscribers who are the most vulnerable and suffering the
greatest health risks," said Les Greenberg, a onetime safety-net policyholder
who successfully sued Anthem last year, alleging overcharging. "It's an
unauthorized, surreptitious rate
increase."
duke.helfand@latimes.com
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