Calling the premium increases proposed by CareFirst BlueCross BlueShield "excessive," Insurance Commissioner Steven B. Larsen approved rate increases yesterday that were less than half as much as the company sought.
Overall, according to the Maryland Insurance Administration, CareFirst was seeking increases averaging about 21.5 percent, which would have brought about $160 million in added revenue. The rates approved by Larsen average 8.1 percent and will bring the Owings Mills-based company about $60 million.
The rates, effective Jan. 1, cover 387,400 Marylanders who have individual and small employer (up to 50 workers) policies. Large employers negotiate rates with insurers, and their rates do not need to be approved by regulators.
CareFirst officials declined to answer questions, but issued a written statement saying the rates they sought "were actuarially sound and accurately reflected the rising cost of health care."
In a letter to William L. Jews, CareFirst's chief executive officer, Larsen said his own actuaries anticipated increases in the cost of paying claims that "differed significantly" from the increases CareFirst projected.
The rates, as requested and as approved, vary considerably by type of policy, by the age of the member and, in some cases, by where in Maryland the member lives.
Larsen said he was particularly troubled by the rates requested for open-enrollment policies, which are offered without medical exams and are intended to provide coverage for those who have trouble getting policies because of their medical history.
For family coverage for a 55-year-old in the Baltimore area, CareFirst sought to raise the premium from $924 a month to $3,207 - a 247 percent increase and a total cost of $38,484 per year. The insurance administration approved a 7.7 percent increase, to $995 a month.
The open-enrollment policies cover 7,400 Marylanders and will be replaced in July by a new, state-run high-risk insurance pool. Given the relatively small number of people covered and the fact that the policies will terminate, Larsen said, "is all the more reason you don't need to triple somebody's premium."
CareFirst gets about $32 million a year in hospital discounts in return for offering the open-enrollment policies.
Although the rate increases sought on the more popular plans were much lower than on the open-enrollment policies, Larsen knocked them down as well.
For example, on its "personal comprehensive" coverage for individuals, CareFirst sought an increase of 23.9 percent for a 40-year-old with a $100 deductible, from $243 a month to $301. Larsen approved a premium of $268, a 10.3 percent increase. CareFirst said 111,800 are covered by its individual policies.
Overall, Larsen said, CareFirst's rate requests had been more "aggressive" than those of other carriers.
A survey last month by Aon Consulting, a benefits consulting firm, found that most health insurance premiums in the Baltimore area were increasing about 15 percent for next year.
The rate review has no direct connection to CareFirst's plan to convert to for-profit operation and be sold to WellPoint Health Networks Inc., a California insurer, for $1.3 billion. Larsen is conducting a separate review to determine whether that deal is in the public interest.
CareFirst can request a hearing before Larsen to dispute the rate decisions. Larsen said yesterday that there has never been such a hearing reviewing so many different rates. CareFirst did seek a hearing last year when Larsen denied a 50 percent rate increase sought for open-enrollment policies.
In that case, Larsen upheld the initial rate decision, but CareFirst won a ruling in Baltimore Circuit Court that Larsen had exceeded his authority in saying CareFirst should use its hospital discounts to subsidize the policies. Larsen appealed, and a decision is pending in the Court of Special Appeals.