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Dec 17, 2002
CONTACT: Jerry Flanagan, (415) 633-1320
Health Care Costs Triple for Many Californians
Consumers Fight BackSAN FRANCISCO. Against the back drop of double digit premium increases over the last two years, two Blue Shield customers joined Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights to discuss the impact of skyrocketing health insurance costs. Recent news reports showed that Kaiser, Health Net, California Physicians', Aetna and Blue Cross have more than $2.2 billion in excess cash reserves, called Tangible Net Equity, while instituting dramatic premium hikes.
Bruce Bodaken, CEO of Blue Shield of California, recently announced a plan to provide health insurance for all Californians. Health care advocates lauded Bodaken's initiative but were critical of the plan because insurers would be guaranteed new customers but would not be subjected to cost controls.
"This holiday season HMOs are playing the part of Mr. Scrooge -- mailing out premium increases and cutting back on quality care," said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights. "Don Lapin's and Jon Marcus' stories tell the tale of what millions of California consumers are experiencing: health care has become a scarce commodity."
FTCR will pursue state legislation in 2003 to require a 'prior approval' system for health insurance rates which would authorize an independent regulator to review a health plan's financial health and deny rate increases if they are deemed excessive or unnecessary. Such systems have effectively controlled rate increases in home and auto insurance markets.
For Consumers with Employer Sponsored Health Care Benefits:
* Employees are paying 27% more on average this year than they did last year for individual coverage, and 16% more for family coverage.
* While premium costs increase, health care benefits continue to decrease. 17% of insured employees experienced a decline in benefits since 2001.
* In 2002, 61% of small businesses offered health coverage to their workers, down from 67% only two years before. As a result, more working Californians will lose their health care benefits.
Premiums, co-payments, and deductibles have increased 20-30% for consumers and employers this year over 2001 levels. As result, consumers will have to pay more out-of-pocket for medical coverage and may loose coverage altogether as employers are forced to dropped benefits.
According to the 2002 HMO Intercompany Rate Survey, HMO premiums for employers rose 16% to 22% in 2002. Small employers and consumers with individual insurance policies can expect 30% and higher increases for premiums, co-payments and deductibles.
"I have been a Blue Shield Individual PPO customer since 1995, at which time my premium was $70 per month," said Don Lapin of San Francisco. "In the ensuing 7 years my premiums have tripled while my real insurance benefits have gone down. My deductible has increased from $1000 to $1500. There is now a $250 fee for brand name medicines. Just recently, Blue Shield sent yet another notice to me of a rate increase. My monthly payments have increased by 25 percent in the last year alone."
In a recent letter to the Department of Managed Health Care, Mr. Lapin also cited concerns that his insurer, Blue Shield, had printed misleading statements as to the true cost of health insurance coverage on its website. Mr. Lapin went on to write:
"As a nonprofit insurance provider, Blue Shield should also be required to disclose, on its web site, what percentage of the member payments go toward actual services versus administrative expenses. There should be a separate breakout percentage for advertising, which seems to account for a steadily increasing share of the consumer's premium dollar."
Click here to read Mr. Lapin's entire statement.
The California Department of Managed Health Care (DMHC) reports that 5 HMOs have more than twice the state required reserves on-hand, a measurement called Tangible Net Equity (TNE). Blue Cross and Aetna have 400% of the required amount. The state requires HMOs to maintain sufficient assets to protect enrollees from HMO bankruptcies however excess reserves may be deposited and withdrawn at will. TNE is not reported as revenue or 'cash on hand' in public reports.
"If you don't have your health, you don't have much else," said Jon Marcus of San Francisco, a Blue Shield customer. "Why should we allow a system to govern our health care that places profit far above the very purpose they representů our health? This insurance system has to change."
Landmark auto insurance reform initiative championed by FTCR's Harvey Rosenfield in 1988 established a 'prior approval' system for car insurance premiums. That ballot initiative, Proposition 103, protects consumers with a simple mandate: "No rate shall be approved or remain in effect which is excessive, inadequate, or unfairly discriminatory." As a result of Proposition 103, the Department of Insurance has the authority to deny rate increases. According to the National Association of Insurance Commissioners (NAIC) 26 states require a 'prior approval' system for HMO rate increases.
"It's outrageous that health insurance companies can raise rates without state oversight," said Flanagan. "Health plans should play by the same rules that apply to the auto and home insurance markets."
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