Md. seniors facing boosts in 'Medigap' costs Prudential sends out notices of increases averaging 16 percent

'Unconscionable'

State is reviewing Blues' request for rise in rates

November 24, 1995|By M. William Salganik | M. William Salganik,SUN STAFF

Seniors, worried about possible cutbacks in the federal Medicare program, face a more immediate problem -- increased costs for "Medigap" health insurance.

Prudential, the largest Medigap group insurer in Maryland, with 42,000 policies sold in the state under contract with the American Association of Retired Persons, sent out notices this month of rate increases in Maryland averaging 16 percent, effective in January.

And Blue Cross and Blue Shield of Maryland, the largest individual Medigap insurer in the state, is requesting rate increases averaging about 12 percent for its 94,000 policyholders. The request is being reviewed by the Maryland Insurance Administration, which expects to have a decision on rates within the next few weeks.

Depending on the type of policy, individual increases may vary considerably from the average. Prudential's new rates include increases ranging from 1.1 percent to 39.2 percent. Its most popular policy, covering nearly 17,000 Marylanders, is going up in cost by 23.4 percent, from $68.50 a month to $84.50. The rate is based on the claims experience for that particular type of policy. Policies vary by whether, for example, they include coverage for prescription drugs or at-home recovery.

The difference in increases can cause some consternation. Sylvia Greenberg of Owings Mills, who has an AARP-Prudential policy with her husband, Paul, recently got a notice saying premiums for the couple would jump 38 percent -- from $104.02 a month to $143.92.

"The amount of the increase was unbelievable," Mrs. Greenberg said. She said they have had their policy since 1984, when they paid $41 a month. The rate increase, she said, was "incredible, unconscionable," particularly given concerns about Medicare benefits.

President Clinton and Republicans in Congress have been locked in a well-publicized battle over funding levels for Medicare, which covers many health costs for the nearly 37 million Americans over 65. About three-quarters of all Medicare enrollees also have supplemental insurance to take care of deductibles, co-pays and other expenses Medicare doesn't cover, according to estimates by the federal General Accounting Office.

Of those with insurance in addition to Medicare, according to the GAO, about half have retiree benefits from employers and about half purchase supplemental insurance policies, commonly known as "Medigap."

Medigap policies are increasing in cost even faster than other health insurance policies "because other insurance products are depending on managed care to control costs," said Alan Richards, counsel to the Health Insurance Association of America. Managed care plans control patient access to specialists and other expensive treatments.

Jerry Carey, a spokesman for Prudential, said in the first half of 1995, his company's claims under Medicare Part B, which covers doctors and outpatient treatment, increased 38 percent over the previous year.

In addition, Mr. Richards said, older policies such as those held by the Greenbergs are increasing in cost even faster than newer policies, which were created under 1990 federal legislation to offer standard bundles of coverage.

As for Mrs. Greenberg's policy, Mr. Richards said, "there is a very direct relationship between age and health care utilization."

As the cost of Medigap policies increases, Blue Cross and Blue Shield is "getting more and more calls for Medicare HMO policies, which provide all the benefits that Medicare supplemental policies do, as well as prescription drugs, prevention, dental care and vision," said Jennifer Conrad, the Blues' individual market manager.

An HMO, or health maintenance organization, is a form of managed care, in which costs are only covered if patients visit the HMO's doctors. Currently, Ms. Conrad said, the premium for Medicare HMO is $25 a month -- much less than Medigap policies.

And in its new rates, the Blues are proposing a "zero premium" for Medicare HMO, according to Robert Royer, an actuarial assistant for the Blues.

Under such an arrangement, the federal government pays an insurer based on the average Medicare claims in the region. The insurer (in this case, the Blues) assumes the risk if its costs are higher than average, but makes a profit if it can hold costs down.

So far, fewer than 1,000 people, of about 600,000 Medicare enrollees in Maryland, have selected the HMO option with the Blues, Ms. Conrad said.

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