Huge Rate Increases in California Small Group Health Insurance January 1, 2010

California health insurance companies are welcoming the second decade of the 21st Century with huge rate increases for small employers (2-50 employees). The largest rate increases are on the HSA (Health Savings Account) compatible plans. For their part, the health insurance companies blame the increases in the HSA plans on:

1) Increased utilization – meaning that many people are using a lot of medical benefits and the insurance companies are paying out more than they are taking in;
2) Improper pricing of the plan originally – Kaiser and Blue Shield of California both are having nearly 30% increases in their HSA plans and they claim that they “mispriced” the plans when they introduced them into the market place. (Skeptics might say that they intentionally priced the plans low to gain market share.)

On the HSA plans rate increases near 30% are not uncommon. Some groups will see nearly 40% increases. Small groups receiving increases less than 20% should feel lucky.

Some carriers like Anthem Blue Cross of California claim to have only single digit increases – which is true based on a comparison of rates the previous quarter. When compared to year ago rates, the increases are much higher.

Compounding the rate increases are the underwriting guidelines for many of the carriers (particularly Health Net and Kaiser) which automatically increase the Risk Adjustment Factor (RAF) to 1.1 for groups with fewer than 6 enrolled employees. Many employers have laid off employees and now fall below the 6 employee threshold and will see an additional increase in premiums.

Employers faced with these huge rate increases can change from one company to another and possibly offset the increase – there are anamolies that might work for certain groups. Call us 800-746-0045 if you would like to discuss your options.

Down grading to high deductible plans is also becoming popular – and these are HIGH deductibles. Anthem Blue Cross Solution plans with 2500, 3500 and 5000 deductibles might be an option. The HSA high deductibles may not be such a great deal.

We can only hope that the Federal health care reform will lower premiums – all indications however, are that premiums will actually INCREASE.