Blaming the cost to implement health care reform, the state's largest health insurer has proposed eye-popping rate increases to state regulators for individuals and small businesses.
CareFirst BlueCross BlueShield wants to raise rates an average of 25 percent on those who buy coverage individually. Chet Burrell, the insurer's CEO, said the increase was needed to cover the cost of more sick people who will be joining the insurance rolls under health care reform.
People with pre-existing conditions were denied coverage prior to health care reform, keeping insurance costs down.
In recent years, rates for individual insurance coverage have risen an average of 7 percent to 11 percent, according to various studies.
"We have always supported the intent and goal of the Affordable Care Act, but this is the practical result of it by opening the pool to everybody," Burrell said.
The rate increase must be approved by the Maryland Insurance Administration, which indicated it would closely examine rate increase proposals made by CareFirst and other insurers who operate in the state.
"I want to stress that these rate filings reflect the carriers' requested rates," said Maryland Insurance Commissioner Therese M. Goldsmith in a statement. "In Maryland, the premium rate a carrier requests is not always the rate that is granted."
The rate proposals are for health insurance plans that would be offered under a state exchange — an open marketplace where people would be able to shop for insurance. Most people would continue to purchase insurance through job-based plans separate from the exhange.
Burrell said small businesses purchasing through the exchange would see CareFirst rates rise on average 14 percent to 15 percent because of rising health care costs and new taxes, fees and assessments required under health care reform.
Older individuals could see decreases under the proposed rates, but younger people could see increases of as much as 150 percent, reflecting limits on how much rates can vary based on age, Burrell said.
Insurance companies around the country have been warning about higher rates because increased fees required under health care reform and the higher expense to cover more people, said David Heupel, a senior health care analyst at Thrivent Financial in Minneapolis.
"What all these companies are doing is they are trying to pass it along," Heupel said.
Advocates for health care reform have argued that it ultimately will help stem rising costs and may even reduce premiums as more people are required to buy insurance. Part of the law is designed to limit insurance companies' profits. But even advocates acknowledged that insurers would raise rates for many at first.
Other insurers proposed lower rate increases than CareFirst to the state, but also expressed concern about the cost and uncertainty of health care reform. Insurance companies can only predict how many new people will buy insurance and will not know the health of new customers.
"It is a brave new world and there is great deal of uncertainty," said Dr. Phil Polakoff, chief medical executive with FTI Consulting, an Annapolis-based business advisory firm. "I don't know how the health companies can come up with plans with any validity."
Coventry Health Care, a Bethesda-based insurer, said it based its numbers on the best estimates it could.
"While we have taken great care to ensure that our projections are as accurate as possible, health exchanges are new territory for the industry, and many uninsured individuals will be entering the market for the first time," said Kristine Grow, Coventry's vice president of corporate communications.
Coventry did not provide an average rate increase as CareFirst did. Rates for its "small group" HMO plan — used by small businesses — will rise 3.9 percent. The company said it couldn't say how much the rate increased for its individual HMO plan because it is a new plan from what was offered last year.
CareFirst also is offering new plans, but was able to come up with its rate increases by comparing new plans with plans it offered last year.
In its proposal, Kaiser Permanente laid out nine plans for individuals and said "the weighted average rate increase across all pools" is 4.3 percent. It will offer 15 plans under the small group market at an average rate increase of 2.8 percent.
"We can confirm that some provisions of the Affordable Care Act appear likely to contribute to premium increases, while other provisions will contribute to reductions in premiums for the coverage that will be available starting in 2014," the company said in a statement.
A spokesman for Aetna said rate increases in the small group market would range from 12 percent to 16 percent. The company said the impact on the individual market would vary greatly because the new plans are different from what is offered currently.
Rates at United Healthcare would increase 15 percent to 28 percent in the small group market. The company hasn't filed plans yet for individual coverage.
Some health care providers worry higher rates could result in fewer patients using health care. Higher premium costs often translate to higher deductibles, and that could lead more consumers to avoid the costs of doctor visits, said Nancy Smit, CEO of SHR Associates, a health care consulting firm in Annapolis.
"Some of the women's OB/GYN groups we work with are seeing women not come in for their routine care as frequently," said Smit, who works with physician groups, community health centers and other health care organizations. "It could definitely have a negative impact on consumers as they try to balance what their premium costs are and their out-of-pocket expense."
The complex health care reform law and the uncertainties around it could be encouraging insurance actuaries to recommend much higher rates in an abundance of caution, said Edmund Haislmaier, a senior research fellow at the Heritage Foundation.
If insurers set rates too low and lose money one year, they are precluded from raising rates to compensate the next year, he said. That could encourage insurers to err on the side of high rates, leaving open the possibility of rebates later.
"I think it's entirely expected," Haislmaier said of the proposed rate increases. "This legislation didn't just make one or two changes to the market."
Meanwhile, it's difficult to forecast how many businesses and individuals will opt to pay fines for lacking insurance, he said.
"These are big unknowns," Haislmaier said.
Coventry said its rate projections were driven by several factors, including new taxes and fees and the cost of benefits it is required to cover in its plans under health reform. Costs also will be affected by the general rise in health care expenses, rules that require coverage of even the sickest individuals and restrictions on how much premiums may vary because of age.
One of the factors the Maryland Insurance Administration will need to review is the way insurers are calculating how sick the new people who sign up for insurance are, said Carolyn A. Quattrocki, director of the governor's office of health care reform.
"It is really important not to reach any conclusions about the filings but the insurers and ultimately what the rates will be," Quattrocki said.
Two new carriers, All Savers Insurance Co. and Evergreen Health Cooperative, also plan to offer insurance, but don't have existing customers that would be impacted by their rate requests.
Burrell said CareFirst wants health reform to work, but that it will take time to figure out the cost structure.
"It is about getting people into affordable health care coverage and still remaining financially sound," he said.
Scott Dance contributed to this article.
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