Bigger premium boosts expected at CareFirst

Health insurer points to rising medical costs

August 09, 2002|By M. William Salganik | M. William Salganik,SUN STAFF

CareFirst BlueCross BlueShield, the area's largest insurer, expects premium increases for next year to be even higher than this year's, although the numbers are not final, James P. Day, a CareFirst spokesman, said yesterday.

Day said CareFirst's premiums for the current year increased 14 percent to 18 percent across a range of insurance plans and markets. Some employers, he said, might have seen higher or lower increases this year - some less than 10 percent, some more than 20 percent - based on the age and health of the employee group.

A higher increase would be consistent with national trends, in which premiums have grown faster and faster in the past few years.

A May study by the Kaiser Family Foundation found that premiums nationally rose 4.8 percent in 1999 and 8.3 percent in 2000, then jumped 11.0 percent last year.

This year, Day said, medical costs have been accelerating.

He noted a study by the consulting and actuarial firm Milliman USA, released last month, in which health maintenance organizations nationally were projecting 17 percent rate increases for next year. HMOs in the South Atlantic Region, which includes Maryland, predicted 19 percent increases.

"In terms of the [medical] cost side of the formula," Day said, "19 percent is probably about as accurate as we're going to see." Prescription drug costs have been increasing by about that amount for several years - driven by a combination of expensive new drugs and an aging population. Day said CareFirst is starting to see increases of a similar scale in other areas, such as hospitalization and outpatient care.

CareFirst is required to file for rate increases for small employers and individuals with the Maryland Insurance Administration. Day said the company - which covers 3.1 million people in Maryland, Delaware and the District of Columbia - generally files about Oct. 1 and does not make its numbers final until shortly before that.

The insurance administration reviews financial data and can cut the rates if it does not consider them justified by costs.

Rates for large employers (those with more than 50 workers) are negotiated between employers and insurers, and are generally based on the claims history of the work force.

For the past few years, the industry has been raising premiums at a faster rate than medical costs have risen, improving profit margins. Mid Atlantic Medical Services, Inc., a Rockville insurer, reported Wednesday that in the second quarter, premiums per member were 9.7 percent higher than in the year-earlier quarter, while medical expenses were up 9.1 percent.

Day said CareFirst was looking to improve its margin but also was wary of pricing its products higher than those of its competitors.

Employers vary in how much of the cost increase gets passed along to workers. The author of the Milliman study, Steve Cingich, said, "Increases of this level cannot be sustained without significant reaction in the marketplace. I look for employers to increase employee responsibility," through a shift in premium costs and higher co-payments.

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