Health Insurance Premium Hikes Shock Small Businesses

Published: Mon 01 Mar 2010

Larry Roth

As Anthem Blue Cross takes flak for proposing premium increases of as much as 39 percent on individual policyholders, other health insurance providers have shocked small businesses with increases that in certain cases surpass 75 percent.

Tom Simmons, the president of a consulting and design firm with four employees in Oakland, said he had recently read about the Anthem rate hikes when he received a letter from his insurance company, Blue Shield of California, telling him that his monthly family health premium would increase from $908 per month to $1,596 per month, an increase of almost 76 percent.

"This industry is getting out of control. It makes me fearful of future years and what could become of things if something doesn't change," commented Simmons, who insures his family of three with his business medical policy.

Ultimately, Simmons was able to lower the increase by 16 percent after changing to a plan with higher out-of-pocket expenses and a higher deductible.

California medical insurance premium hikes have received attention at both the state and national levels since early February, when Anthem Blue Cross told many of its 800,000 independent policyholders that their rates would skyrocket by up to 39 percent.

Anthem's hikes spurred a state Assembly committee hearing in addition to Congressional testimony from leading executives this week, and the increases were brought up during Thursday's health care summit with President Obama.

Brown Begins Investigation

State Attorney General Jerry Brown subpoenaed financial documents on Thursday from the seven largest health insurers in California. Aside from anthem, the insurers include Cigna, Health Net, Kaiser Permanente, Aetna Health, Blue Shield, and PacifiCare.

Brown's office reported that the probe will examine the legality of Anthem's rate hikes and will investigate whether other insurers have similar increases in store.

In the meantime, businesses that fall into the small-group market-or those with fewer than fifty employees-are stunned from the most recent rise in their health premiums.

Businesses that experienced the highest rate hikes seem to have a Blue Shield policy with a high deductible that is also matched with a savings account.

Referred to as health savings accounts (HSAs), these policies were established in 2003 by the Bush administration in an effort to reduce healthcare costs. The policies are endorsed as a free-market solution to exploding healthcare expenses because they require participants to pay more of their healthcare costs out of pocket in order to reduce the use of medical services.

Officials from Blue Shield said the corporation's lack of experience with health savings accounts in addition to the struggling economy forced them to raise premiums, mostly impacting three HSAs.