Congress demands explanation of California Blue Cross' rate increases when profits are up

by L.A.S.

California's Blue Cross operations must be doing great. They experienced record profits in a troubled economy in 2009, yet have raised rates as much as 39 percent. The Los Angeles Times reported on Jan. 28 of this year that Wellpoint's profits soared eightfold.

This news was shortly followed by an article on Feb. 4 in the same paper that Anthem Blue Cross was raising rates on individual health policies in California, in some cases by as much as 39 percent. The same paper reported on Feb. 10 that Congress was opening a probe into Anthem Blue Cross; the Department of Health and Human Services (HHS) was also interested in the case.

Wellpoint is the corporate parent of Anthem Blue Cross; its profits soared to 4.7 billion dollars last year, a record for them and extremely impressive in the current economic climate. There might be a link behind the improved profits and the fact that Blue Cross dumped 1.4 million policyholders last year, who were no doubt the most-expensive-to-insure and the least-desirable-actuarially.

Besides these U.S. government departments, interest in this development has also been expressed by public-interest or progressive social/political organizations such as MoveOn. You might like to visit the latter's website at MoveOn dot org where they are gathering signatures for an electronic petition demanding an explanation and rollback of the Blue Cross rate increases.

The need for prompt intervention in this corporate abuse is needed because not only is Blue Cross refusing to explain the rate increase, it is threatening to deliver further rate increases without warning. Even though many states require stringent reporting and forecasting of claims and payouts, there is no national regulation of rate increases. By that I mean, no limits on how much they can raise rates, nor on how often they can raise rates. This is the next best thing to having a license to print money.

So far, Blue Cross is stonewalling on an explanation and will continue to do so until this issue becomes a public-relations problem. That is why I urge you to spread the news of this case and to sign petitions, write letters to the editors, and blog AND do whatever else you can think of to be a thorn in Blue Cross' butt.

UPDATE: As of Monday, Feb. 15, Blue Cross announced that they will delay the rate increases for two months. This is evidence that public pressure has made them uncomfortable, but a short delay is not enough. Keep applying the pressure and we believe that they will be forced to abandon the effort.

Remember the Part in 'Sicko' When Sick People Had Policies Canceled Back to Starting Point?

by LAS

The Michael Moore film Sicko threw light on many kinds of problems that ordinary people have with their health insurers. One such problem is rescission, where a company decides that it issued a policy in error (often claiming the policyholder lied or omitted required information on the application), and cancels that policy all the way back to its starting date.

This sticks the hapless policyholder with all the bills that the insurer had paid while the policy was in force. Sicko related the story of one such victim of the rescission power, who had omitted a history of yeast infection and was stuck with a $7000 surgery bill for an unrelated illness. NAIC, the regulating body for the insurance industry, has decided to take steps to curb abuse of rescission and bolster consumer protection.

NAIC sent a letter to the House Energy and Commerce Subcommittee on Oversight and Investigation. In this letter, NAIC outlined its plan to analyze rescission-related consumer complaints, and develop procedures for external reviews of these rescissions. It stated that it is determined to prevent abuses of the rescission authority, which is used by insurers to cancel policies that it decides were issued in error.

It is nice to see that Moore's film has prodded NAIC to at least examine the practice of rescission and promise to improve consumer protection. We will see what comes of this, or whether the industry will pull the teeth out of any attempts to regulate itself.

CANCELABLE AND NON-CANCELABLE POLICIES

Now, having gotten that material out of the way, this is what you need to know about the circumstances under which your policy may be cancelled, aside from non-payment of premium.

There are five main categories that govern renewal provisions: Non-Cancellable, Guaranteed Renewable, Conditionally Renewable, Optionally Renewable, and Cancelable.

These are graded from highest to lowest, and the cost of a premium reflects each grade of policy. The top three are greatly preferred by you, the consumer, over the bottom two grades.

The Non-Cancelable is the most expensive; the insurer may not cancel on you, may not change rates, and must renew up to a certain age (usually age 65).

The Guaranteed Renewable policy has these features: the insurer may not cancel but may raise rates for the whole class of policies (ex.: everyone in your state, all smokers), and must renew to a given age.

The Conditionally Renewable policy maybe cancelled but only if they cancel an entire class (like smokers, or anyone with pre-existing conditions). They may raise rates but only if they raise rates for an entire class of insureds.

The Optionally Renewable policy is one that the insurer may cancel for you as an individual, the insurer may raise rates for you as an individual, and may even drop you at the renewal date.
The Cancelable policy may be cancelled at any date, change rates at any time --but this is the cheapest policy.

--- Ready for a breather? Just one more section of heavy-duty reading and then it gets easier, OK?