June 14, 2009
Los Angeles resident Ruta Miller, 44, prides herself on keeping fit. "I'm super-healthy," she told me. "I exercise all the time. I eat well. I haven't even had a cold in I don't know how long."
So she was a bit startled to receive a notice from Blue Shield of California saying that her monthly insurance premium would rise by almost 54% on July 1.
Miller's situation illustrates the danger people face as politicians and industry lobbyists continue wrangling over reform of the U.S. healthcare system.
Much of the attention so far has focused on President Obama's proposal for a public insurance plan that would compete with private plans.
But an equally important issue is how costs would be controlled if, as seems likely, a national mandate is approved requiring the roughly 47 million people in this country now lacking coverage to buy policies.
"If nothing changes, then you essentially are going to be going . . . deeper and deeper into your pocket to keep the healthcare that you've got," Obama said at a town hall event in Wisconsin last week.
Miller understands that all too well.
She works part time for an auction house and part time as an actress, and has had an individual policy from Blue Shield for about eight years.
In that time, the only halfway serious condition in Miller's life has been a low thyroid level, which she was diagnosed with in 2001. She takes a pill to regulate the condition.
Other than that, she says, she's a paragon of clean living and good health.
So what could possibly explain a 54% hike in her monthly insurance premium?
The letter Miller received from Blue Shield wasn't helpful. It said that "rates are changing due to rising costs across the healthcare industry. Major drivers include hospital upgrades, new technologies and expensive new drugs."
Blue Shield could have made these claims at any point over the last 50 years.
So I put my question to Aron Ezra, a company spokesman.
He responded with a statement reiterating what was said in the letter and also blaming hospitals for charging private insurers more because they weren't being fairly compensated by Medicare and Medi-Cal.
"We agree that insurance premiums are rising far too fast -- and this is symptomatic of our broken healthcare system," Ezra said. "Our system needs an overhaul."
It turns out that Miller's sky-high premium reflects two factors. The first is a 28% increase because, well, just because.
That's apparently at the high end of what Blue Shield's individual policyholders are getting hit with this time around. Local insurance brokers say the company's increases this year run from about 8% to 28%.
The other factor is a 26% increase because Miller turns 45 in August. Although that occasion is nothing more than an arbitrary moment on the calendar and represents no material change in her health, lifestyle or behavior, to Blue Shield (along with most other insurers) this apparently marks a watershed event in her life.
Ezra declined to comment on Blue Shield's age-related rates.
Miller and her husband shared a family plan for a number of years until they switched to individual health savings accounts in 2007. This required them to take out high-deductible plans that offered lower monthly premiums.
In Miller's case, she signed up for a Blue Shield plan with a $2,400 deductible, meaning that she's responsible for the first $2,400 in healthcare costs annually before her insurance starts sharing the load.
In 2007, Blue Shield charged Miller a monthly premium of $240, or $2,880 a year. In 2008, her monthly premium jumped about 31% to $315, or $3,780 annually.
This year, Miller's monthly premium will soar to $484 and the annual cost of coverage for the same exact insurance policy will be $5,808 -- a more than 100% increase in just two years.
This statistic is made all the more incredible by the fact that nationwide healthcare expenditures have risen by about 6% annually during that time, according to federal government figures.
"It's extraordinary," said Richard Kronick, a professor of family and preventive medicine at UC San Diego. "The individual insurance market is a terrible market for health coverage."
Helen Halpin, a professor of health policy at UC Berkeley, says one problem is that major purchasers of health insurance, such as large employers, are able to negotiate significantly lower premiums for people in their group.
"The insurers need to make up the lost revenue somewhere," Halpin said, "and the only place they can do it is the individual insurance market."
In other words, insurers like Blue Shield put the squeeze on people like Miller because they can, not because actual circumstances warrant a rate increase.
"These people are being abused," Halpin said.
Obama's idea for a public plan would solve this. People seeking coverage outside the employer-based insurance system would be able to pool together, spreading risk more broadly.
Another solution would be for private insurers to stop offering individual policies and to create their own group plans. With 47 million people as potential customers, we're talking about some mighty big groups, which would reduce risk and presumably keep prices down.
Just to be sure, though, such plans would need to be closely monitored to ensure fair treatment and costs.
"This can't keep happening," Miller said. "At some point, I won't be able to afford insurance."
More sooner than later, if Blue Shield has anything to say about it.
David Lazarus' column runs Wednesdays and Sundays. Send your tips or feedback to firstname.lastname@example.org.
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