Without cost controls, insurers see higher rates

Blue Cross & Blue Shield CEO James E. Purcell is not greeting health care reform with open arms. It’s just one more challenge to tackle. More

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Without cost controls, insurers see higher rates

COST CONTROL: Blue Cross & Blue Shield of Rhode Island President and CEO James E. Purcell at the PBN-sponsored health care summit.
Posted 5/10/10

It’s not easy being Blue Cross & Blue Shield of Rhode Island these days.

Despite collecting a record $1.7 billion in premiums in 2009, the nonprofit insurer lost $100 million for the year, and it saw its reserves dwindle to $558 per member, down from $713 in 2008. By the end of 2010, reserves are expected to drop to $479 per member.

In the Direct Pay market, which only Blue Cross serves, the company was denied any rate hikes last year, and for 2010, it got a 6 percent hike, well below the 10.2 percent it wanted.

In the commercial market, it has faced a firestorm for seeking double-digit rate hikes amid a recession. And though it was granted 9.8 and 9.9 percent hikes for the small and large-group markets, respectively, it’s under pressure to avoid further hikes by controlling medical costs.

So forgive President and CEO James E. Purcell if he’s not greeting health care reform with open arms. It’s just one more challenge to tackle.

“There’s a lot we don’t know,” he warned at the outset of a recent interview. “As people pore through this act, they’re going to find glitches and goblins … plus [the U.S. secretary of health and human services] is going to have to issue guidelines interpreting a lot of this stuff.”

But here’s what he does know: There will be a new premium tax (starting in 2014, and estimated at $70 billion over 10 years), and a much-larger tax on “Cadillac” plans starting in 2018 that he said grossly underestimates how much a typical plan will cost by then.

There will be new mandates, such as zero-copay preventive care for all, and no annual or lifetime caps on benefits, and family-plan coverage up to age 26. Plus thousands of individuals newly obtaining coverage, and tight new restrictions on the individual market.

“I see this as a recipe for significantly increased premiums,” Purcell said. He’s certain of it. “I think it’ll increase rates all the way around. It pretty much has to.”

Purcell is not alone in his view: Karen Ignagni, president and CEO of America’s Health Insurance Plans (AHIP), the national lobbying group, has warned of dire consequences.

“Health care reform legislation that does not address underlying medical costs cannot be sustained,” she said before the bill’s passage. “Unfortunately, this legislation will drive up health care costs by adding billions in new health care taxes and encouraging people to wait until they are sick before getting insurance.”

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