Los Angeles resident Steven Dornbusch wasn't surprised when he learned that Anthem Blue Cross was raising premiums by a whopping 39% for many of its California policyholders.
Dornbusch says he's seen his Blue Cross rate jump six times over the last 38 months, adding up to a premium increase of nearly 107%.
"I've never gone eight months without an increase," says Dornbusch, a 53-year-old artist and handyman.
Though recent insurance company rate hikes have made headlines and stoked public outrage, consumers in the private health insurance market, as well as healthcare experts, know that frequent premium increases are just a sign of business as usual.
"We've seen rate increases of this size before," says Anthony Wright, executive director of Health Access California, a statewide advocacy group. "These are large and unreasonable, but they are not unprecedented."
In the individual insurance market, rate hikes occur in a few different ways.
Periodic rate hikes hit a large number of customers at once. They can occur quarterly or twice a year; most take place annually at the beginning or in the middle of the calendar year. Insurers typically cite medical costs, inflation and medical loss ratios (the proportion of revenues from health insurance premiums the insurer spends on medical services) as justification for these increases.
Individuals are also singled out based on life changes, such as a recent birthday, which can push them into a new and more expensive age group. The cost to different age groups varies among the different insurers, but according to Carrie McLean, consumer specialist with the online health insurance exchange eHealthInsurance.com, policyholders should generally expect their rates to go up at their 30th and 40th birthdays and then every five years thereafter.
Some insurers also use community ratings, which take into account how many medical services were used within a particular geographic area, to justify a rate increase. If medical claims have been particularly high within a community, rates for individuals within it could rise regardless of their own health.
The laws about how and when insurers can raise rates vary by state. In California, insurers can raise rates as often as they choose, as long as they spend at least 70% of the premiums they collect on medical claims rather than on administrative or other costs. California health plans must also provide customers with 30 days' notice of a planned rate hike.
Efforts to tighten restrictions are underway at the federal and state levels. President Obama has proposed expanding federal oversight of insurance premium increases as part of his plans to reform healthcare. In California, legislation has been introduced to establish a rate increase review system and prohibit health insurers from raising rates more than once a year.
Individual policyholders remain the most vulnerable to health insurance rate increases. But even if you're in this boat, there are ways to keep your premium costs down, at least to some degree.
Verify accuracy
Upon receiving notice of an increase, it's a good idea to check with your state's insurance department to make sure your rates are in keeping with those on file and approved by the insurance commission and that your insurer has not made a mistake and put you in the wrong age group, says Cheryl Fish-Parcham, deputy director of health policy with the nonprofit health advocacy group Families USA.
In California, this oversight is split between two government agencies. Contact the Department of Insurance if your policy is a preferred-provider organization (PPO). If you have health maintenance organization (HMO) coverage, the Department of Managed Health Care is the place you should check.
If you feel the most recent rate increase is unreasonable, find out from your state's insurance commission, which enforces state insurance laws, if there is a forum through which to voice your concern. In some states, rate increases must receive prior approval from the insurance commission before going into effect. Sometimes feedback from the public can influence whether those rate hikes are approved.
In California, insurers operate under a procedure called file and use: They must file rates with the Department of Insurance 30 days before raising them. After the 30-day waiting period, they are clear to use them. Only after the new rates have gone into effect can the California Department of Insurance investigate to make sure they comply with state law.
Shop around
Many consumers incorrectly assume that they are locked into a one-year contract with their insurer. In fact, policies in the individual insurance market are month to month, leaving open the option to change plans frequently.
