Last Wednesday, many took time off from work to speak out at a hearing regarding the latest round of rate hikes of up to 26.2%. The increases are the result of a settlement made by the state Division of Insurance, the state Attorney General and Blue Cross. Residents told regulators how years of rate hikes have left them paying hundreds per month for high deductible insurance.
CU spoke on behalf of policyholders, arguing that the state should require more justification for the hikes, and require Blue Cross to spend more premium dollars on medical care. But it‘s doubtful residents will get the relief they need.
The Division of Insurance and Attorney General’s office both failed to oppose the rate hikes regardless of expert witness testimony pointing out flaws in the approval process and a lack of underlying data to justify the increases. The Attorney General's office stood by the settlement, arguing that it was the best deal the state could get for consumers at the time.
Consumers Union recently pointed out how some nonprofit insurers are building surplus profits far above the required amount. In fact, nonprofit mutual insurer Health Care Service Corporation, of which Blue Cross Blue Shield of New Mexico is a division, amassed more than $6.7 billion while repeatedly raising rates. What’s worse is that the company wants to impose these large increases on individual market consumers even though it has almost doubled profits this year from the same period as last year with surplus growing another half of a billion dollars.
The hearing was the culmination of a ten-month saga that’s left New Mexicans frustrated and furious. Last November, Blue Cross proposed average rate hikes of 24.6%, and, with little required justification, the state Division of Insurance approved the increases. Public outcry forced the Division to schedule a hearing and the Attorney General stepped in to advocate for policyholders. But, to the dismay of New Mexicans and Consumers Union, prior to the April 26 hearing, state officials struck a back room settlement deal with Blue Cross to reduce the proposed increases by just 3.3%. This outraged policyholders even more, and resulted in a new hearing held on August 25 to determine if the settlement is fair.
Blue Cross did everything it could to prevent New Mexicans from getting a fair hearing. The company hired the state’s former Attorney General to represent it. Company lawyers tried to suppress evidence in the case, and even sued to stop the hearing, but the state Supreme Court ruled that it go forward.
Executives for Blue Cross came to the hearing surrounded by bodyguards. At the end of the testimony, they got up and left before consumers had a chance to speak. “Where are they going? Why are they leaving now?” the audience members shouted.
The New Mexico rate increases demonstrate exactly why we need strong regulators to stand up to companies who aren’t acting in the best interest of policyholders. A final decision on the rate hike is expected in six weeks. Unfortunately, in New Mexico, rate payers may get no relief from these unjustified premium hikes.
Download report as PDF.
In the past decade, nonprofit Blue Cross and Blue Shield (BCBS) health insurers set aside billions of dollars in surplus – essentially retained profits – even as they raised premiums for consumers by as high as 20 percent annually, according to a new report by Consumers Union, the nonprofit publisher of Consumer Reports magazine.
The report, entitled “How Much is Too Much,” should prompt state insurance commissioners to take a hard look at the surpluses collected by nonprofit BCBS health plans and crack down on skyrocketing rate increases, said Sondra Roberto, Staff Attorney for Consumers Union.
“These Blue plans hit consumers with big premium hikes while they’ve built up enormous surpluses,” Roberto said. “These rate hikes could have been reduced or avoided if companies applied just a portion of their surplus to rate stability, while leaving sufficient funds for solvency protection.”
Surplus is the excess of an insurance company’s assets over liabilities, which plans hold to protect the company and its members from financial losses. Nonprofit BCBS plans, including community-owned charitable plans and subscriber-owned mutual plans, held more than $32 billion in surplus at the end of 2008, according to A.M. Best.
Consumers Union reviewed ten diverse nonprofit BCBS plans, and found that 7 out of 10 of the plans held more than three times the amount of surplus that regulators consider to be the minimum amount needed for solvency protection.
These surplus funds are built primarily with consumers’ premium dollars, and insurers typically include a targeted contribution to surplus in rate increases. Surplus can be used to moderate premium increases, yet Consumers Union found that some financially strong BCBS plans with large surpluses have continued to seek double-digit rate increases. The report cites several examples, including:
Contact: Michael McCauley – 415-902-9537 (cell) or David Butler – 202-462-6262
]]>Blue Cross Blue Shield is a household name for most Americans. Since the 1920s, Americans have accessed health insurance through non-profit BCBS plans. Today the brand touts itself as “the largest health benefits provider in America, serving nearly 100 million people in all regions of the country.”
Times have changed. Many of the individual BCBS companies have switched to for-profit status, while even the nonprofits appear to be putting profits before policyholders. Our new report looks at the hoards of surplus dollars sitting in BCBS plans while policyholders struggle with big rate increases and reduced benefits.
Says Betsy Imholz, Director of Special Projects in our West Coast Office:
“Maintaining a healthy surplus is absolutely critical, but this is just too much. These companies know that every time they raise rates, some people simply won’t be able to keep their insurance anymore. People lose coverage and maybe access to needed medical care. If you are sitting on piles of excess surplus, then you should use some of it to make sure your policyholders can afford their insurance.”
Add this to your handy list of reasons to be outraged at insurance companies. Taking just a few examples from the report, research showed that in Arizona BCBS hit consumers with double digit rate increases in 2007, 2008 and 2009 while increasing their surplus to $717.1 million, more than seven times the amount that states typically require to protect against insolvency. Health Care Services Corporation seems to be flush as well, but wasn't shy about raising rates in Texas, Illinois and New Mexico.
What’s worse is during the time these non-profit BCBS plans were raising rates and stockpiling record surpluses, families with Blue Cross coverage wrote into us describing unrelenting premium increases. Bonnie from South Wilmington, IL says that her BCBS health insurance now eats up one-fifth of her monthly salary. And for some folks like James of Oak Forrest, IL these premium increases have forced them to cut benefits.
The report highlights much of the abuse but we’re definitely not done yet. Have you had a major health insurance rate increase? Tell us your story so we can hold companies accountable for the rates they charge in light of the surpluses they keep.
Jim Guest, the President and CEO of Consumers Union, the nonprofit publisher of Consumer Reports magazine, made the following statement in support of Dr. Donald M. Berwick's appointment to head Medicare and Medicaid:
“We are relieved that President Obama moved ahead on this appointment. Don is a health care leader of extraordinary skill, knowledge, and compassion. He's the right person for the job at this critical moment. He will make a fundamental difference in improving the way the system works for Medicare and Medicaid beneficiaries, and everyone.
“He is a rare individual who has the unique breadth and depth of experience and understanding to help bring about the improvements in the health system consumers want to see. Don gets that people are frustrated with the fragmentation and high cost of care. And he understands the urgent need to provide doctors and patients with good information about their treatment options so they can make informed decisions.
“Our system today rations care in the worst way – based on people's ability to pay and when insurers deny or limit access to care. Don understands that our health care problems won't be solved by rationing care but by eliminating wasteful, unproductive spending in a bloated system that too often fails to base treatment decisions on scientific evidence and the best interest for patients.”
Media contact:
David Butler, 202-719-5916
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization serving the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.
]]>WASHINGTON, D.C. – Consumers Union, the nonprofit publisher of Consumer Reports magazine, announced it has nominated Teresa Moran Schwartz, the Chair of Consumers Union’s Board of Directors, to serve on a newly created health advisory panel devoted to comparative effectiveness research (CER).
Ms. Schwartz was nominated to serve as a consumer representative on the board of governors for the Patient-Centered Outcomes Research Institute (PCORI), a nonprofit entity established by the new health reform law. The institute will conduct research to compare the effectiveness of medical treatments and guide the implementation of CER policy under the law.
Consumers Union has been an active supporter of CER as an important way to help patients and doctors make better informed decisions about medical care and prevention. "Teresa is a visionary whose experience, integrity, and common-sense ability to get results make her an ideal choice to serve the public interest on the PCORI Board," said Jim Guest, President and CEO of Consumers Union. "Comparative effectiveness research is absolutely critical to reforming health care, and in all of my work with consumer leaders over the last several years, I can think of no one who would be better for this crucially important assignment."
As Chair of Consumers Union’s Board of Directors, Ms. Schwartz presided over and helped direct a significant expansion of Consumers Union’s work in health care. She advocated and secured Board support for Consumers Union’s health reform campaign, with one key goal being a permanent enterprise devoted to CER. She also was a strong proponent of the launch of the Consumer Reports Health Ratings Center, which provides comparative information for consumers on treatments, services and providers, and ConsumerReportsHealth.org, which provides independent, fact-based ratings and advice to consumers on how to get the best care.
Previously, Ms. Schwartz served as Deputy Director of the Bureau of Consumer Protection at the Federal Trade Commission, and she served as professor, Associate Dean for Academic Affairs, and Associate Dean of Students at George Washington University Law School.
As the world’s largest independent consumer testing, survey, research, and advocacy organization, Consumers Union publishes Consumer Reports, Consumer Reports.org, and other products and services serving the consumer interest with a total combined circulation of more than 8 million.
Media contact:
David Butler, 202-719-5916
On Thursday, July 1st, the Federal Government launched the new Pre-Existing Condition Insurance Plan in 20 states that chose not to set up their own programs. That means that if you live in Georgia, Minnesota, Arizona, and 17 other states you’re amongst the first consumers to get access to this new benefit created by the health care reform law. If you live in the rest of the 50 states you’ll soon also have access. Most of those states have indicated they will quickly follow the federal government’s lead in setting up these new insurance plans.
You’ve probably heard of “high-risk pools” that currently exist in some states and provide coverage to folks that have been denied by insurance companies. This program is a big improvement on established high risk pools as there is no waiting period to cover your pre-existing conditions and premium rates are set at the average amount a healthy person would pay. That doesn’t necessarily mean that consumers will be able to afford these new plans because subsidies for insurance coverage don’t kick in until 2014, but nonetheless this program acts as a stopgap for certain individuals that currently aren’t covered by employer provided insurance and are finding that the individual market won’t work for them.
"This program is intended to be a bridge for uninsured people, who have been cut out of the private insurance market because of some previous medical problem, until 2014 when pre-existing condition exclusions will no longer be allowed,” said DeAnn Friedholm, Director of our Health Care Reform Campaign.
You can access this new benefit by visiting www.HealthCare.gov; the new website also launched on July 1st as a hub for consumers to identify coverage options in their area and access helpful information about medical care. Check out the website and put in your state to see when the new plans start in your area.
That’s California, where state law authorizes this kind of investigation. In many states, insurance laws are far weaker. Insurance companies can raise rates if they wish, and the reasons why are kept secret from the public.
In May we started digging into rate filings at the Texas Department of Insurance and blogged about how BCBS of Texas filed for well over 100 different rate increases on their individual plans over just the last four years. Research at the department of insurance uncovered a history of rate hikes by insurers in Texas but many supporting documents were marked CONFIDENTIAL. Some insurance companies routinely allow the public to see everything, while others fight to keep everything except the rates themselves confidential.
BCBS of TX marked documents confidential for some rate increases, but left open other nearly identical files. That means we got a good idea exactly what these companies are trying to keep secret, and it is surprising. Among other things, they don’t want you to know their “target loss ratio” – the share of your premium dollar they intend to actually spend on medical care.
We asked the Attorney General’s office for an opinion on the insurer’s claim that these rate filings should be kept from public scrutiny. Just this week BCBS of Texas responded (PDF Download) with an argument against public disclosure stating that these filings hold “trade secrets” (like the formula for Coke or Google’s algorithm).
Here’s a sample (PDF Download) of the document they are trying to keep secret, from a similar rate increase filing not marked confidential. Several things stand out. The proposed loss ratio of 66.5% is quite low (soon, insurance companies will have to spend at least 80% of premiums on medical care). Administrative expenses are quite high. It seems, there is room here to negotiate something better for consumers—IF consumers knew what was going on.
Are these rate increases unjustified like in the case of Anthem Blue Cross Blue Shield in California? Some of the filings we’ve requested include increases of up to 30% for individual policies in Texas. That’s an awfully big increase to ask for if you are not willing to tell the public exactly why you need it. While we wait to hear back from the Texas Attorney General why don’t you help us highlight these insurance company abuses by sharing your story with us about health insurance rate hikes.
A new report just released from Consumers Union, the nonprofit publisher of Consumer Reports, shows how nonprofit Blue Cross Blue Shield plans have set aside billions of dollars in surplus profits, even as some plans raised rates for many customers. Nonprofit BCBS plans held more than $32 billion in surplus at the end of 2008. Surplus can be used to moderate premium increases, yet CU found that some financially strong BCBS plans with large surpluses have continued to seek double-digit rate increases. In some states, they raised premiums as much as 20 percent a year for individual market consumers.
To find out more, read the entire report or see below for information about specific states.
State information:
Health Care Service Corporation (HCSC), the insurer that does business as Blue Cross Blue Shield of Texas raised rates on some individual and family plans multiple times between 2007-2010. Some increases in Texas exceeded 20%. At the time of these increases, HCSC’s surplus grew from $6.1 billion in 2007 to $6.7 billion in 2009, up from $4.3 billion just four years earlier in 2005. The company’s surplus is 5 times more than the amount that regulators typically consider necessary for solvency protection.
Health Care Service Corporation (HCSC), the insurer that does business as Blue Cross Blue Shield of Illinois filed rate increases of 10.2% in 2007, 18% in 2008, and 8.4% in 2009. At the time of these increases, HCSC’s surplus grew from $6.1 billion in 2007 to $6.7 billion in 2009, up from $4.3 billion just four years earlier in 2005. The company’s surplus is 5 times more than the amount that regulators typically consider necessary for solvency protection.
Health Care Service Corporation (HCSC), the insurer that does business as Blue Cross Blue Shield of New Mexico filed increases of more than 20% for some plans since 2007. At the time of these increases, HCSC’s surplus grew from $6.1 billion in 2007 to $6.7 billion in 2009, up from $4.3 billion just four years earlier in 2005. The company’s surplus is 5 times the amount that regulators typically consider necessary for solvency protection.
Blue Cross Blue Shield of Arizona raised rates for its individual market customers between 14.5% -19.4% in 2007, 13.1%-15% in 2008, and 8.8%-18.4% in 2009. From 2007 to 2009, the company grew surplus from $648.3 million to $717.1 million, about 7.5 times the amount that regulators typically consider necessary for solvency protection.
Regence Blue Cross Blue Shield of Oregon raised rates on individual policies an average 25.3% in April 2009 and 16% in April 2010. At the end of 2009, Regence had $565.2 million in surplus, about 3.6 times the amount that regulators typically consider necessary for solvency protection.
Blue Cross Blue Shield of North Carolina raised rates on some individuals and families 18.44% in 2008, 8.5% in 2009, and 12.24% in 2010, while growing surplus to $1.4 billion in 2009, about 4.5 times the amount that regulators typically consider necessary for solvency protection.
Blue Cross Blue Shield of Alabama had a surplus to $649 million in 2009, about 2.4 times the amount that regulators typically consider necessary for solvency protection.
Excellus Blue Cross Blue Shield of New York had a surplus of $965 million in 2009, about 2.5 times the amount that regulators typically consider necessary for solvency protection.
Blue Cross Blue Shield of Massachusetts had a surplus of $724 million in 2009, about 3.6 times the amount that regulators typically consider necessary for solvency protection. This year, Blue Cross Blue Shield of Massachusetts sought rate increases of 10 -19% for small businesses and individuals. The increases were denied by state authorities, though the insurer is appealing.
In 2009, Blue Cross Blue Shield of Michigan requested a 56% rate increase (which was rejected) but still got a 22% increase. The company has said it will need a 20% increase for some plans to break even in 2011. The company had a surplus of over $2.5 billion, more than 3.2 times the amount that regulators typically consider necessary for solvency protection.
Blue Cross of Northeastern Pennsylvania had a surplus of $251 million, about 2.8 times the amount that regulators typically consider necessary for solvency protection.
Blue Cross Blue Shield of Tennessee had a surplus of $1.1 billion, more than 5 times the amount that regulators typically consider necessary for solvency protection.
Blue Cross Blue Shield of Wyoming had a surplus of $144 million, more than 7 times the amount that regulators typically consider necessary for solvency protection.
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