Health insurance premiums for Californians jump as much as 39%

Californians who get their individual health insurance from Anthem Blue Cross, the largest insurer for individuals who don't have access to group health insurance in California, got notice of increases in their premiums of as much as 39% on March 1. This is the second year in a row for many who faced an increase of 41% last year.

Anthem Blue Cross would not comment on the number of members it currently has, but last year when it raised its rates as much as 68% it reported it had 800,000 members. With those types of increases, one might speculate that Anthem Blue Cross wants to get out of the individual health insurance marketplace.

Jeff Sher of San Francisco told the San Francisco Chronicle that his health insurance will go up from $273 two years ago to $530 per month, or 94% in just two years, when the change takes effect March 1. Sher, 59, said he hasn't needed to see a doctor in seven or eight years.

Josh Libresco, 54, of San Rafael, reports his family premiums will go from $858 per month to $1,192 with a $5,000 deductible.
Libresco will have to spend $14,304 on insurance plus $5,000 on medical costs to meet his deductible, or a total of $19,304 before getting any coverage from Anthem Blue Cross.

That may sound high to you but it looks like Californians are finally getting a taste of what I've seen in Florida for the past few years. Last year I finally gave up on health insurance when the small business group market jumped sky-high. The best quote I could get last year on a group plan was $1,200 per month just for me, with a $3,000 deductible. At least Libresco's plan covers his family.

Similar numbers were reported in the Los Angeles Times as well for Anthem Blue Cross customers. The Times followed the health insurance increases of one family, Jan and Paul L'Esperance, who have been with the company for about a dozen years. Their first year they had a $1,000 deductible but raised that to a $2,500 deductible two years ago to keep the premium down to $1,250 per month. Last year they were quoted $1,400 per month, so they raised their deductible to $5,000 to get the premium down to $834 per month. This year the premium is nearing $1,000. For this Southern California couple their premiums are up just 18%. Even those premiums sound unmanageable to many families.

Still wondering why there are so many people who give up on insurance? In California, the Department of Insurance plans to hire an actuarial firm to investigate Anthem's recent increase, yet legally California health insurers can raise rates for policyholders as much as they want and as often as they want. Regulators there technically oversee increases but have no power to control rates.

Is there any justification for those increases? You may say rates are going up because health costs are, but health cost increases come nowhere near the 39% rate increase announced by Anthem Blue Cross. Government researchers at the Centers for Medicare and Medicaid (CMS) expect health costs to go up based on these factors:

• Hospital spending growth is projected to have accelerated from 4.5% in 2008 to 5.9% in 2009, as spending reached $760.6 billion.
• Spending growth for physician and clinical services is expected to have accelerated to 6.3% in 2009, up from 5.0% in 2008, with expenditures having reached $527.6 billion.
• Prescription drug spending is expected to have grown 5.2% in 2009, an acceleration of 2.0 percentage points from 2008, and to have reached $246.3 billion.

Clearly none of these factors justify a 39% increase, but individual health insurance companies know they can get away with it because there are so few providers out there. The insurers know they have a captive audience because if one has any type of health condition they either won't be able to get coverage from a new insurer or coverage for a particular disease could be denied as a preexisting condition for 12 to 24 months or, in some states, permanently.

Unless some form of health reform is passed this year, we'll only see more of the same or worse every year health care reform is delayed.

Lita Epstein has written more than 25 books including Working After Retirement for Dummies and Surviving a Layoff: A Week-by-Week Guide to Getting Your Life Back Together.