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Blue Cross Hike Stuns Customers

By Winthrop Quigley
Copyright © 2010 Albuquerque Journal Journal Staff Writer
          About 40,000 people who get health insurance through Blue Cross and Blue Shield of New Mexico individual plans face an average price increase of 24.6 percent effective April 1, according to the company's filing with the New Mexico Insurance Division.
        Some customers are outraged, but Deputy Superintendent Thomas R. Rushton said the division found the premium increases to be justified, and said they are due to rising medical costs and demographics unique to individual insurance plans.
        Meanwhile, Presbyterian Health Plan, which also offers individual health insurance, expects 10 percent premium increases this year, said the plan's president, Dennis Batey.
        Lovelace Health Plan, which has a very small individual plan customer base, expects single digit increases.
        John Barber of Albuquerque said he first bought Blue Cross and Blue Shield individual insurance in 2006 for $120 a month and paid $182 for coverage last year. The company alerted him his premium will rise to $224 when his policy renews May 1, "and I've never been sick," Barber said.
        Taos resident Wylie Elson's premiums were $234 in 2005 and will reach $572 this year.
        "I am a healthy person, not hospitalized since a childhood appendectomy, with no chronic conditions, and taking no medications," Elson wrote in a letter to federal Health and Human Services Secretary Kathleen Sebelius and provided to the Journal.
        The nearly 18,000 customers of the company's most popular individual plan, BlueDirect B, will see a 29.5 percent increase. About 2,700 customers face 10 percent increases. A handful of members in two plans will get no increase.
        The company said it is closing all 12 of its 2009 individual plans to new members, with the exception of BlueEdge and Blue Transitions, and has started selling three new BlueDirect plans to new members.
        Blue Cross and Blue Shield said it will allow existing customers to apply for coverage under the new plans.
        Mutual company
        Blue Cross and Blue Shield of New Mexico is owned by Health Care Service Corp. of Chicago.
        HCSC is a mutual insurance company, which means it is owned by its customers. Any profits a mutual insurer earns must be reinvested in the business or given to customers. HCSC also owns Blue Cross and Blue Shield companies in Illinois, Oklahoma and Texas.
        It was announced premium increases in excess of 30 percent by California insurance companies prompted President Barack Obama to propose a federal system to review and adjust proposed health insurance rates.
        The Centers for Medicare and Medicaid Services estimates health care expenditures in the United States grew 6.24 percent in 2009. The Consumer Price Index, the nation's measure of inflation, declined 0.4 percent in 2009.
        Health insurers generally find that the longer a member remains insured, the higher the costs of covering that member become, regardless of the member's age or health status.
        A 2006 study for the Society of Actuaries by Milliman Inc. found that claims costs in the first year of coverage in an individual plan are 75 percent to 85 percent of costs in the second year. Costs climb steeply every year before leveling out after about four years, Milliman found.
        Blue Cross and Blue Shield of New Mexico spokeswoman Becky Kenny said in an e-mail exchange with the Journal that this so-called "durational" impact produced claims costs higher than the company expected.
        The Insurance Division's Rushton also said younger, healthier people tend to drop individual coverage because they can't justify the expense or because they can shop around for a more favorable rate.
        Older and less healthy people, who utilize more care and more expensive care, are left in the insurance pool with fewer young and healthy customers with whom to share costs. That pushes each individual's premium higher.

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