FOUL PLAY

Insurance company mistreatment

Did you know insurance companies are not required to disclose how they set their premiums? Not knowing means small businesses have no idea what increases in their health insurance costs they will be hit with from one year to the next, making it impossible to budget.

An article in the May 2008 issue of Texas Medicine, the magazine of the Texas Medical Association, speaks to the importance of transparency in health insurance premium setting, particularly for small businesses that have very little negotiating leverage:

"A little known law passed [in Texas] in 2007 gives employers the right to ask their health plans exactly how much of their premium dollar is spent on health care. This information is a health plan's "medical loss ratio," and organized medicine is teaming up with small business representatives to urge employers to ask questions...

"When the Harris County Medical Society (HCMS) requested its medical claims history from Blue Cross after large premium increases in both 2005 and 2006, it too was unpleasantly surprised.

"'We've had some very large increases the past two years,' said Executive Vice President Greg Bernica. 'We got copies of our actual experience from them [Blue Cross], and it just does not seem to justify the level of increase that they have provided to us.'

"HCMS offers its 21-member staff a choice between a PPO product and an HSA. In 2006, the society was jarred by a 22.4-percent increase for its PPO and a 21.7-percent increase in HSA premiums. That, Mr. Bernica says, was despite the fact that Blue Cross paid out only 67 percent of premium dollars for care under the PPO, and only 9 percent under the HSA during the previous year.

"The following year, premium dollars spent on health care fell to 51 percent in the organization's PPO, but premiums still rose 12.4 percent, Mr. Bernica says.

"Adding insult to injury, when the Houston Chronicle asked Blue Cross officials why Harris CMS's premiums rose so much, they could not or would not be specific as to how the renewal premiums were calculated. They said the rates likely were affected by several factors involving the society's own employees, as well as trends involving 19,000 other companies with which it was grouped for rating purposes. Just which companies and where those companies are located wasn't disclosed either. Blue Cross officials also said factors such as employees' ages and the type of medical claims filed also may have influenced premium rates.

"The law passed in 2007 only requires insurers to disclose actual health claims paid, not how rates are determined."

The way the public Medicare program sets it premium, on the other hand, is completely transparent.

That is another reason we need a choice of public health insurance to compete on a level playing field with the private insurance companies. A public health insurance plan will set a high standard of transparency and if the private insurance companies don't meet it, we can take our business elsewhere.

Read more in the "Foul Play" Archive.

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