Insurers Hike Price of Health Plan Premiums
Health insurers, who generally have held the line on prices since the advent of medical cost controls in 1983, are raising premiums this spring, often at more than double the rate that doctors’ fees, hospital bills and other medical charges climbed last year.
Blue Cross of California, the state’s largest health insurer, is notifying 7,000 small- and medium-sized companies employing a total of about 500,000 people that their premiums will rise an average of 18.6% starting June 1--the first premium increase since 1984.
A spokesman for Blue Shield of California, which insures 1.3 million Californians, said the insurer hasn’t calculated its average rate boost, but he added that it could go as high as 15%.
Blue Cross and Blue Shield are following scores of insurers throughout the country who are raising premiums in response to escalating health care prices, industry and business health experts say.
Making Up for Cuts
There is also evidence, they say, that doctors and hospitals may be increasing rates charged to private insurers to make up for cuts in government-sponsored health insurance programs. Overall medical prices rose 7.5% in 1986, compared to the general inflation rate of 1.5%, according to the consumer price index compiled by Bureau of Labor Statistics.
For Californians, the premium increases may be particularly painful because the state already has among the highest health insurance premiums in the country due to the high cost of medical care in the West, according to area insurance industry officials.
“These are some of the biggest increases we’ve seen since the early 1980s,” said Jeffrey R. Miles, president of the California Assn. of Health Underwriters. “Companies are going to have to start re-evaluating their benefits packages all over again and look for ways to cut costs” by switching to alternative health care plans such as health maintenance organizations and preferred provider organizations.
Yet even some health maintenance organizations, long viewed as a refuge from high medical costs, are increasing prices. Although the nation’s largest investor-owned HMO, Maxicare Health Plans Inc., says it plans no general rate increases in Southern California, it543711603across the country, spokeswoman Tobi Nyberg said, including a 20% boost in South Carolina.
Increases have been less dramatic for big companies, since they are often self-insured and pay premiums based on the actual health care costs of their employees rather than for a general risk pool. Still, a spokesman for Southern California Edison said the company expects health insurance costs for its 14,000 employees to be higher than the 7.5% rate of medical inflation in 1986.
Surprise All Around
The increases have surprised business executives and health care experts alike.
“I was shocked,” said Peter Frank, president of Brett Wyckoff & Ahern, a Century City-based real estate development company. Frank calculates that his monthly health insurance premiums for the 16 employees covered will jump 53%, from $137 a person to $209.
“We are already paying through the nose,” said Frank, adding that he could not think of anything that could account for such a large increase other than “outrageous” doctor fees. “I think what we may have to do is maybe start making our employees pay some of the costs.”
And Lee Greenburg, a Los Angeles insurance broker, said monthly insurance premiums for one of his clients, a wholesale novelty company insured by Blue Cross of California, will also increase 53%, to $210.96 from $137 per person.
‘Way Out of Line’
“They had one big claim last year . . . but (the increase) is still way out of line,” Greenburg said. “I mean the guy died, how much could their (medical) costs have been?”
Blue Cross spokeswoman Sharrell Blakeley said she could not speak to individual cases, but added that in general the round of increases announced by the company are “needed to keep pace with inflation, to encompass rising utilization of services and to reflect the cost of new technologies emerging in medical care.”
Blue Cross and Blue Shield are not the only insurance firms passing on increases in doctor and hospital bills to employers. Prudential Insurance Co. of America, which covers 1 million Californians under various group plans, is raising premiums by about 15% this year.
Because rate increases are running nearly double the increase in medical inflation last year, even some health care experts are puzzled.
‘Huge Price Increases’
“I was somewhat surprised when I see insurers announcing huge price increases,” said health care economist Jack A. Meyer, whose Washington research company, New Directions for Policy, was recently hit with a double-digit price increase. “The underlying factors driving health insurance seemed to have tapered off. Raising prices in the face of declining demand doesn’t make sense. . . . (It) could accelerate the deterioration of market share” held by the insurance companies.
But experts do not think that the increases in health care premiums portend another round of general inflation even though health care spending, which represents more than 10% of the nation’s gross national product, has a sizable impact on the nation’s economy.
“Health care (spending) . . . has the biggest effect on the overall rate of inflation,” said Lawrence Chimerine, chairman of Wharton Econometrics, a research firm in Philadelphia. “But I don’t see prices generally going up. The pressure is in the other direction . . . because of the huge budget deficits and the need to cut spending.”
But experts predict that the increases will eventually filter down to consumers who will be forced to pay still higher deductibles and co-payments.
That could increase the number of companies opting to go without insurance, experts say.
“There are already some 30 million (people) without insurance now,” Meyer said. “If the big price increases causes a significant drop-off in business, it could be self-defeating . . . and it could push more employers into offering their employees no insurance at all.”
