Consumers who buy individual health policies feel trapped
Health insurers across the country are dramatically increasing rates and slashing benefits for many of the estimated 17 million consumers with individual insurance policies, while making it almost impossible to obtain affordable alternatives.
The problems have captured national attention as President Obama steps up his campaign in Washington for a healthcare overhaul and Congress investigates rate hikes of as much as 39% by Anthem Blue Cross in California.
Health and Human Services Secretary Kathleen Sebelius and members of Congress this week continued a drumbeat of criticism of insurers, including Anthem, saying they are putting profits ahead of customers who must buy individual policies rather than group coverage.
Sebelius released a report Thursday that drew attention to big rate hikes sought by insurers in several states, including California, Oregon, Michigan and Connecticut.
“Millions of Americans are in the least secure marketplace . . . the one in which people have virtually no options,” Sebelius said. “Their only choice is to pay increases or drop the coverage.”
More daunting is the prospect of millions more workers being forced to buy individual policies as employers look to further slash or eliminate company-paid group health benefits.
Rate increases are forcing many policyholders to make undesirable choices. In an effort to reduce their rates, many consumers are raising deductibles as high as $7,500 and paying more out of their pockets for basic services. Others are avoiding visiting doctors for fear of tainting their medical histories. Some are canceling their coverage altogether.
And it’s not only people with serious conditions, such as cancer and diabetes, who have a hard time navigating individual markets. A variety of preexisting conditions -- such as ear infections, varicose veins and sleep apnea -- make others just as vulnerable.
Consider Tatiana Korolshteyn, an unemployed Redondo Beach mother who can’t pay Anthem’s 39% rate hike and fears that other insurers will reject her because of a 2-year-old back injury, caused by a car accident, that has since mostly healed.
“These are awful choices,” said Korolshteyn, 35. “I feel trapped.”
Rate increases by insurance companies are a fact of life for the nation’s insured, but sharp hikes this year in California have provoked a national outcry that has brought criticism from President Obama and prompted investigations in Sacramento and Washington.
Next week, state and federal officials will conduct public hearings into Anthem’s impending increases, which take effect May 1. (Originally set for March 1, the increases were delayed by parent WellPoint Inc. for two months while independent actuaries, hired by California’s insurance commissioner, review them.)
Sen. Dianne Feinstein (D-Calif.) announced Friday that she would introduce legislation next week to dramatically expand federal authority over health insurance premiums. Her bill would allow the secretary of Health and Human Services to review, modify or deny “unjustified” increases in states such as California where insurance commissioners have limited authority.
Feinstein’s effort, and next week’s public hearings, follow public outrage by policyholders, regulators, consumer advocates and lawmakers, including Rep. Henry A. Waxman (D-Beverly Hills), who is presiding over a congressional inquiry.
Health insurance leaders say they agree that individual markets are rife with problems but insist that the trouble is caused by factors beyond their control -- namely, the soaring cost of medical care and the churn of customers who enter or leave the individual market, depending on employment.
The sour economy has prompted many younger and healthier people to forgo or cancel insurance, companies say. As a result, insurers have had to spread the cost of individual insurance over smaller numbers of ailing policyholders who keep coverage they desperately need.
“A lot of what you see today is a product of the way the market works,” said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans, the industry’s Washington-based lobbying arm. “The market is broken. Those people who do need the coverage wind up covering the cost of everyone else.”
WellPoint executives say that about a third of Anthem’s 800,000 individual policyholders in California turn over annually. WellPoint underestimated how much it would have to pay for its customers’ care in 2009, executives said. The company told congressional investigators last week that it lost money in California’s individual market in 2009.
“At the end of the year, when all things were said and done, premiums were insufficient to cover claim costs that we actually paid out,” said Brian Sassi, who oversees individual markets nationwide for the company.
Insurers in California and most other states have wide latitude to pick applicants for individual coverage, rejecting those they don’t want as they compete for the healthiest customers. Individuals have little if any leverage to negotiate rates the way that companies can bargain on behalf of large blocks of employees.
Unlike group insurance plans offered through employers, individual plans factor customers’ medical histories into their premiums. Insured individuals have different rates, depending on their ages, locations and health conditions.
Insurers say the selection process is key to controlling costs. But it also can lock consumers into policies in which premiums escalate rapidly, particularly if a policyholder becomes sick after buying a plan.
Such consumers have little choice but to pay the higher costs, with limited ability to evaluate prices, critics say. Comparative rate information for such plans is hard to come by in most states, including California.
“Insurance companies in the individual market in states have long figured out how to manipulate the policies and the prices in order to shake off bad risk or charge you through the nose if you stay,” said Karen Pollitz, a research professor at Georgetown University’s Health Policy Institute. “It’s a mess of a market. And there’s no security of coverage.”
A handful of states, including New York and New Jersey, do not allow insurers to cherry-pick customers. In such states -- and under health reform proposals pending in Congress -- insurers are required to sell policies to all buyers, regardless of preexisting conditions. In addition, the national reform bills would bar insurers from charging more because of health problems.
That would be welcome news to Kathy Klossner, 50, of San Diego County, who makes a point of visiting the doctor as seldom as possible for fear of tarnishing her medical record.
Klossner’s insurer, Woodland Hills-based Health Net, notified her in January that her insurance premium would rise 35%, to $372 a month from $276. Concerned about losing insurance and eager to lower her premium, Klossner is increasing her deductible to $4,800 from $3,600. She sees her insurance as a hedge against catastrophic illness.
“I’m very scared to go to the doctor for anything,” she said. “I’m just so frustrated.”
Times staff writers Noam N. Levey and Lisa Girion contributed to this report.