R.I. says Blues can't raise individual health premiums

Regulators disliked the plan putting half the money it raised into its reserves.

By Emily Berry — Posted March 9, 2009

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In Rhode Island, the commercial market for individual insurance is made up of exactly one company -- Blue Cross & Blue Shield of Rhode Island. It has about 14,000 members who buy their own insurance, and as it has in the last two years, Blue applied to the state's health insurance commissioner to raise its rates for 2009.

The company asked for rate increases on its four individual products averaging 5.9% to take effect April 1, said John Cogan Jr., the executive assistant for program and policy review at the office of the health insurance commissioner. But half of that increase was aimed at contributing to the Blues' surplus fund -- now at around $444 million, Cogan said.

And the last two years' requests had overshot need, indicating that the company's actuaries were overestimating its cost trends, Cogan said.

Taking those things into consideration, he said, "it wasn't even a close call." The commissioner denied the rate request.

Though the state's decision wasn't based on the recession driving more people into the individual market -- more people with less money to spend on insurance -- the Blues' response did reference the economy.

The company does not plan to appeal the commissioner's decision.

"Given the economic climate, we understand the rationale," spokesman Chet Lasell said.

Lasell would not comment on whether the rate increase would have boosted the company's surplus. But he said its surplus sits at the low end of the range independent researchers have set as an appropriate level.

Meanwhile, a Feb. 18 Los Angeles Times article reported that California health plans had raised rates for so-called HIPAA policies -- for people who have lost employer-sponsored insurance -- higher than is allowed under a 2001 state law.

The Health Insurance Portability and Accountability Act guarantees a worker the right to buy insurance on the open market after he or she leaves a job and employer-sponsored plan, either right away or after COBRA coverage has expired. Federal law does not limit what insurers charge for those policies.

The California Dept. of Managed Health Care is investigating every plans' rates and how they calculate increases, spokeswoman Lynne Randolph said. The 2001 law does not set penalties for violations.

WellPoint subsidiary Anthem, formerly known as Blue Cross of California, is notifying about 13,000 subscribers that they will be receiving rebates because they were mistakenly overcharged between 2006 and January 2009, spokesman Ben Singer said.

State lawmakers and regulators are putting more heat on plans to justify individual rate increases, especially as the market grows as people lose jobs, employer-sponsored health insurance or both.

In California, several major health plans have paid settlements over allegations that they improperly rescinded individual policies when members' claims became expensive. The plans did not admit wrongdoing.

In Michigan, lawmakers last year blocked legislation that would have changed regulations in the individual market to benefit Blue Cross Blue Shield of Michigan.

The plan argued that it loses money on individual products and announced in January that, absent regulatory reform, it will raise rates on those products by an average of 56%.

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