Blue Cross and Blue Shield of Maryland's request to raise rates by 10.3 to 20.9 percent for so-called "medigap" coverage for the elderly was met with skepticism by Insurance Division officials.
"These [proposed increases] are rather startling," said Insurance Commissioner John A. Donaho yesterday during a hearing about the request. While the increases may be justified, Donaho said, the Insurance Division needs as much information as possible to support any decision it reaches.
The increases would affect 105,000 Marylanders who have Blue Cross Medicare supplemental policies, which pay various expenses not covered by Medicare.
Blue Cross said proposed increases are in response to the federal government's decision to boost the deductibles for Medicare coverage on Jan. 1. Blue Cross has asked that its proposed increases also go into effect Jan. 1. However, any increases could be delayed if the Insurance Division takes longer to makes its decision.
Medicare deductibles will go from $592 to $628 for hospital coverage and from $75 to $100 for medical coverage.
Other reasons for the increases include escalating health-care costs and the greater use of Medicare-covered services.
Besides Donaho, those hearing the Blue Cross case were Philip L. Wickenden, associate commissioner of life and health for the Insurance Division; Sidney A. Green, assistant chief actuary for the division; and Meg Rosthal, the division's assistant attorney general.
Green said that other commercial and non-profit health insurers had not experienced the increases that Blue Cross has.
Linda S. Benedict, vice president and general manager for Blue Cross' individual market division, said she was not aware of the experience of other groups. "It depends on the groups and the way the benefits are designed," she said after giving her testimony. "Our data is correct."
Blue Cross has four different types of medigap policies: premium, choice, standard and basic.
The premium policy, which is closed to new customers, pays all costs not covered by Medicare, including prescription drugs and a lifetime stay in the hospital. That plan has 1,800 subscribers.
Choice and standard, the two plans that cover 90 percent of the medigap subscribers, offer less coverage than does premium. Neither choice nor standard plans have prescription coverage, and the standard policy does not cover outpatient medical expenses unless it is an emergency.
The basic policy has the features of the standard plan, but the subscriber must pay the deductible for a hospital stay.
Under the Blue Cross proposal, rates for the premium and basic plan would go up 20.9 percent. Choice policy premiums would go up 11.1 percent and standard rates would rise 10.3 percent.
The annual rate for a 65-year-old person would go from $155.52 to $187.92 for a basic policy. For the same person, the standard annual premium would increase from $343.08 to $378.36 and the choice annual rate would rise from $634.44 to $705. The premium annual rates would jump from $1,903.20 to $2,300.88.
After Blue Cross presented its case yesterday, two medigap policy-holders testified against the increase.
"The proposed increase is shocking, it's really shocking," said Bernard John Medairy Jr., 69, a lawyer who practices in Towson.
He said the increases in Medicare deductibles amount to $61 per person. Even if every subscriber went to the hospital during the year, this would amount to about $6.4 million a year in extra expense to Blue Cross. But the possibility of even 50 percent going to the hospital is unlikely, "unless the rate is increased and 50 percent of the clients have heart attacks," Medairy said.
He said a more realistic estimate is that 20 percent of the subscribers will go to the hospital, which would result in a total of $1.3 million, or about $12.20 per customer per year.
Medairy also said the rate request should not include an inflation factor because he foresees a deep financial recession that will lead to deflation.
Joan E. Ancell of College Park, who is in Blue Cross' most expensive medigap program, disputed the need for the increase since Medicare has been steadily reducing its payments to hospitals.
She also said Blue Cross may actually be paying less for the prescriptions for her plan than it did a year ago. This is because the insurer switched from a system where the customer paid a flat $7 for each prescription to one where the customer must pay HTC 30 percent of the cost for brand-name drugs and 20 percent for generic drugs. According to Ancell's calculations, this has increased the cost of drugs to the policyholder by nearly 100 percent.
Ancell, who is 49, is a retired public school teacher who receives Social Security disability payments.
She complained that the notice sent by Blue Cross to medigap customers about the proposed increase did not include the proposed amount or when and where the hearing would be held. When she did call a Blue Cross service representative to find out what the increases would be, she was told that it was not the policy of Blue Cross to give such information to customers.