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About 27,000 people who buy Personal Choice health insurance directly from Independence Blue Cross rather than through an employer are facing steep increases in their premiums in March to maintain similar coverage - for some, greater than 60 percent - or are finding comparable coverage unavailable.
Despite angry complaints from policyholders, Blue Cross says the changes are necessary because of continuing losses in the Personal Choice plans. And the state Insurance Department says there is little it can do, even after it resisted a proposal last spring to raise rates for the plans by amounts ranging from 10 percent to 58 percent.
One reason: Blue Cross sidestepped the issue by withdrawing its proposed increases. Instead, it told state officials it planned to discontinue the trio of Personal Choice plans in question, which it has offered for the last two decades, and give current policyholders two new choices instead - choices many find unattractive.
State Insurance Commissioner Joel Ario said yesterday that the dilemma faced by Blue Cross and its policyholders showed the importance of revamping state and national health insurance regulation.
Ario said state regulators lacked tools they needed to better oversee insurers' plans and rates. And he said commercial insurers' ability to refuse to cover less-healthy customers - which would be banned under bills that have passed the U.S. House and Senate - deserves much of the blame for the changes Blue Cross is imposing.
As Pennsylvania's "insurer of last resort," the state's Blue Cross/Blue Shield plans are required to provide so-called guaranteed issue health insurance plans to all individuals or families, regardless of their medical conditions or histories.
The Blues' commercial competitors "are simply able to exclude the bad risks," Ario said. But Independence Blue Cross offers its Personal Choice plans to anyone not covered by an employer's group plan.
Blue Cross officials say the result has been a steady erosion in their ability to cover the plans' costs through their premium base.
"We have lost tens of millions of dollars on these products," said Blue Cross spokeswoman Elizabeth Williams.
Rosanne Placey, an Insurance Department spokeswoman, confirmed that Blue Cross has continually lost money on the Personal Choice plans.
In 2008, for example, Blue Cross reported a medical-loss ratio for the plans of 111 percent, which means that it paid out $1.11 in benefits for each $1 it collected in premiums. The year before, it reported a loss ratio of 99.9 percent.
Blue Cross announced the plans' withdrawal to policyholders in a mid-December letter, giving them until Jan. 15 to decide between two new plans: Personal Choice Basic, which includes benefits similar to the least costly of the three current plans but at much higher premiums, and Personal Choice Value HSA, a more affordable plan that features high deductibles and is designed to be paired with a health savings account.
To Joan Daughen Cadigan of Phoenixville, neither of the new alternatives is attractive.
Cadigan now pays about $15,000 a year for herself, her husband, and two children for the Personal Choice Prime Option plan, which has a low $400-a-year family deductible and covers 100 percent of hospitalizations and other major medical expenses.
Come March, the Cadigans would owe a similar monthly premium for the new Personal Choice Basic. But that plan, while maintaining a relatively low $1,000 family deductible, would cover only 80 percent of hospitalizations and similar expenses.
"God forbid something happens, I don't want to be stuck with 80 percent coverage," Cadigan said. "You go in for one minor thing, and suddenly you're stuck with a huge bill."
Cadigan said she might choose the Personal Choice Value HSA instead, which covers 100 percent of most such charges, but only after the family satisfies a $10,000 annual deductible.
"These are huge financial changes for most families," said Cadigan, who estimates that her family's annual medical expenses will rise 20 percent under the new plan.
The steepest rate increases will affect those now covered by Personal Choice Standard Option, the lowest-cost current plan, who choose the comparable new Personal Choice Basic. A single 55-year-old would face a 44 percent increase. A family headed by a 45-year-old would face a 60 percent increase.
"I'm diabetic. I don't have a lot of choice," said Lisa Garrett, 51, a Chester County homemaker who estimates that her health-care costs will rise $4,200 next year as a result of the change.
Blue Cross and state officials said the underlying problem was the steady increase in medical costs, coupled with the ability of some insurers to cherry-pick the best risks.
"We are the only company in this market that offers coverage to anyone regardless of their health, and we're very committed to that," Williams said. "But we need to remain a financially sound company."
Jeff Gelles
Source: Philly.com January 2010
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