California health insurers propose raising rates for small firms

(Los Angeles Times) Some California health insurers are proposing to raise small-business rates more than 10% next month, drawing scrutiny from state regulators.

Aetna Inc., which drew the ire of state insurance officials for a rate hike earlier this year, wants to increase premiums 10% on average, and as high as 24% for some employers. Anthem Blue Cross, the state’s largest for-profit insurer and a unit of WellPoint Inc., has proposed boosting rates 13%. Blue Shield of California is looking to charge some small employers up to 6% more.

Byron Tucker, a spokesman for the state Department of Insurance, said the agency is having discussions with the three companies about whether the proposed rate hikes are too high. Separately, the California Department of Managed Health Care said it is reviewing other proposed rate increases going into effect in July or August. But no matter what their decision is, neither agency has the power to deny increases. They can only urge the companies to cut rates and publicly criticize them if they don’t.

In April, insurance department officials objected to other small-business rate hikes as high as 21% by Aetna and called them “excessive.” But Aetna went ahead with the higher charges.

Aetna spokeswoman Anjie Coplin said its rates “are based on actuarially sound data and a reasonable projection of future cost.” The company also noted that some of its small-business customers will see a decrease in rates starting July 1.

Overall, about 3 million Californians get their health insurance through small businesses with fewer than 50 workers. But rising premiums and the recession have taken a toll. The percentage of California employers offering coverage has declined from 73% in 2009 to 63% last year, according to the California Healthcare Foundation.

California Insurance Commissioner Dave Jones is pushing for an initiative on the November ballot that would give him the authority to reject excessive rate increases for policies sold to individuals and small businesses. Insurers say the measure would give an elected official too much power and wouldn’t address the underlying costs driving up premiums.

In filings to regulators, insurers said the proposed increases are justified based on escalating medical expenses, in particular higher charges for hospital care and prescription drugs. They also cited slightly higher costs for new government-mandated benefits related to maternity and autism care.

Kaiser Permanente, the state’s largest nonprofit health plan, has proposed raising rates as much as 9% for certain small businesses. Joe Smith, vice president of small business for Kaiser, said his company isn’t immune to the industrywide pressures driving up medical costs, even with its coordinated approach of running its own hospitals and network of physicians.

“We still feel the same pressure on utilization, the aging population and new medical technology, which can drive increases in costs,” Smith said. “No small employers are happy. The market is still very tough.”

Tulsa Rib Company, a barbecue restaurant in Orange, has offered health benefits to its employees since 1983. But owners Steve and Liz Parker say they aren’t sure they can afford to do so much longer.

Liz Parker said she switched from Health Net Inc. to Kaiser Permanente in 2010 after her company’s premiums shot up more than 30% annually. She and her workers have been satisfied with Kaiser’s medical care, she said, but the insurer is raising her premiums 8% in August. That comes on top of higher costs for food and gasoline in their restaurant and catering business.

“We continue to be squeezed and squeezed and we can’t pass along all those costs to our customers,” she said.

The Parkers and some other small-business owners are hopeful a new online marketplace for health benefits set to launch in January 2014 will help them secure lower rates. Two years ago, the restaurant stopped paying all of the premiums for workers’ family members and boosted annual deductibles for individuals to $2,000 to reduce its costs.

“I hope the exchange will put my 50 people on a level playing field with companies that have 5,000 people,” Liz Parker said.

The California Health Benefit Exchange is designed to negotiate the best rates with insurers and to help consumers and small businesses purchase health plans using federal subsidies and tax credits.

Enrollment is set to begin in October 2013. The exchange board is scheduled to discuss its small-business program Tuesday in Sacramento.

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About thebenefitblog

Eric is a Producer at Lockton Insurance Brokers, Inc., the world’s largest privately held commercial broker. Eric has over 23 years of experience in the insurance industry and has spent the last 11 years with Lockton. Eric specializes in Health & Welfare Benefits, Retirement Planning, and Executive Benefits. Eric's clients utilize his expertise in the areas of Plan Due Diligence, Transaction Structure, Fiduciary Oversight, Investment Design, Compliance and Vendor negotiation to improve the operational & financial outcome for each client. The Benefit Blog is a place to share that expertise and industry news.
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