State blocks rise in rates for CareFirst

Larsen's ruling affects 33,000 in HMO, PPO

Not enough spent on care

July 01, 2002|By M. William Salganik | M. William Salganik,SUN STAFF

Rate increases for 33,000 members of CareFirst BlueCross BlueShield, which would have gone into effect beginning today, have been blocked by Insurance Commissioner Steven B. Larsen.

Larsen denied the increase because CareFirst's filings showed it was paying less than 75 cents of each premium dollar on care.

The state law governing policies for small employers, those with fewer than 50 workers, requires insurers to spend at least 75 cents of each premium dollar on care.

This is the first time this provision of the law, passed in 1993, has been used to deny a premium increase, said the state insurance administration.

CareFirst was seeking a 16.5 percent premium boost for its BlueChoice HMO product for small employers and 12.4 percent for its preferred provider organization (PPO) policies.

BlueChoice, and its predecessor, CapitalCare, reported spending 73 cents of every premium dollar on care last year, and lower figures for each of the three years before that - as low as 59.7 cents in 1999, according to Debbie Rosen McKerrow, director of communications and consumer services for the insurance administration.

Jeffery W. Valentine, a CareFirst spokesman, said the insurer believed the rates were justified by projected increases in medical costs, but that CareFirst had decided not to challenge Larsen's denial.

He also said CareFirst did not dispute the insurance administration figures on its spending for care, known in the insurance business as the "loss ratio."

The state sets a minimum loss ratio as a way of making sure the rates fairly reflect the insurer's costs.

In a statement last month announcing the denial, Larsen said, "The Maryland Insurance Administration has discussed this issue with CareFirst repeatedly, and although they have made progress toward meeting the 75 percent threshold, it has not been met."

Larsen said he had the power to make CareFirst revise all its rates, but had decided just to deny the requested increases.

Although premiums can vary by geography and by the age of the workers, according to the insurance administration, BlueChoice monthly premiums for a typical worker group in the Baltimore area are $245 for an individual and $735 for a family.

PPO premiums are $267.02 for an individual and $801.07 for a family.

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