No Choice but to Cut Benefits, Hike Premiums, Blue Cross Says

The head of Blue Cross of California’s individual services division, responding to complaints, acknowledged that in a few cases the insurer did not communicate well with its policyholders but conceded little else.

Mark Weinberg, in two interviews over the last 10 days, acknowledged that Blue Cross, the largest health insurer in the state, has been reducing benefits while raising premiums by an average 25% this year. But he insisted that, given cost trends in health care, his company and other health insurers have little choice.

Weinberg’s division serves about 622,000 policyholders.

The interviews were prompted by more than 25 reader complaints about Blue Cross service received by The Times after a story June 28 detailed premium increases this year for individual policies.

Individual policyholders make up about 20% of the people covered by Blue Cross.

“This is a period when our reserves are low,” Weinberg said. “If we are forecasting forward, we must say that our coverage plans that originated eight to 10 years ago are too comprehensive (in their benefits). We’ve got to cut back. So we are cutting back.”

‘Increases Will Continue’

He added that “rate increases will continue,” although the company is trying to reduce them by lowering benefits and by negotiating discounts with doctors and pharmacists within its Prudent Buyer Plan network. Policyholders using these less expensive providers are reimbursed at a higher percentage than those who use doctors and pharmacists outside the network.

Weinberg said that despite such stratagems, there may be only “two or three years of tolerance left in the system”--that major changes in health insurance may then be required as rising premiums and a broader definition of uninsurable risks lead to more people becoming uninsured.

He said the Blue Cross board of directors recently discussed “some mechanism for providing insurance to high risks, either a system where everybody is forced to participate--government insurance--or by the private companies finding a way to equitably share the risk.”

Weinberg said he prefers a private system, but gave no specifics for operating it other than suggesting that certain illnesses would not be covered.

Blue Cross’ reducing benefits while raising premiums has brought complaints from policyholders.

Many of the complaints involved allegations that Blue Cross had failed to inform subscribers adequately about benefit restrictions.

Weinberg conceded that there have been gaps in Blue Cross communications, although he said the company is trying to close them.

Services Excluded

For instance, he acknowledged, it may not have been made clear to policyholders that even though a hospital is within the Prudent Buyer Plan network, not all of its billed services will be reimbursed at the promised higher percentage rate for using that hospital.

Some Blue Cross policyholders said they were shocked to find that services of anesthesiologists and pathologists, as well as X-rays procedures, were excluded from the Prudent Buyer discounts, thus resulting in a much higher share of the bill having to be borne by them.

“Internally, we are very, very aware of this problem,” Weinberg said. He said Blue Cross is looking into the possibility of giving policyholders clearer advisories.

One person complained to The Times that she moved from a $1,000 to a $2,000 deductible on her policy only to discover later that, in so doing, she had moved from one fee schedule to another and was now charged according to her present age, rather than the age she was when she first enrolled in Blue Cross. The result was a hike, not the decrease in her premiums she tried to get. Weinberg said it was possible this person had not been adequately informed.

However, Weinberg rejected other complaints--that methods of computing deductibles are unclear, that premium increases are not adequately explained and that benefits for physical therapy and other treatments are cut as soon as policyholders begin to make claims for them.

Other points made by Weinberg and Rebecca Kapustay, a Blue Cross vice president of operations who joined the interview:

- Fraud is a serious problem at Blue Cross and a special unit has been established to combat it. Kapustay said that attempts are made to bill the insurer for “martial arts treatments” and even “singles seminars” and that visits to some “offices” from which bills have been sent have found no one occupying the premises.

- Blue Cross is trying to move away from the concept of allowable “reasonable and customary” charges, which vary, to set fee schedules for what it will pay for medical services.

- Blue Cross should now be seen mainly as catastrophic coverage. About 95% of its policyholders in any given year do not reach or scarcely exceed their deductibles, thus making few if any claims. The other 5% make the lion’s share of claims, and should this reach 10%, Blue Cross would become financially unstable.