Individuals holding Blue Cross/ Blue Shield policies will get another rate hike, this one of 21.3% (retroactive to April 1), after a settlement was reached Monday between the company, the PRC’s insurance division, the Attorney General’s office and the lone plaintiff in the rate case.
The settlement, was announced by Insurance Superintendent Mo Chavez, before I had a chance to request a delay until new federal regulations regarding state rate setting in conformance with the recently passed federal law came down. The announcement also came in advance of a public hearing on the matter, which had been requested by the Public Regulation Commission. Members of the public, doctors and policyholders, who came yesterday to give input on the rate hike had the rug swept out from under them, since the decision was already made.
It was a strange turn of affairs. Representative Danice Picraux and I, who have been following these issues for over a decade as Chair and Vice Chair of the legislature’s Interim Health and Human Services Committee, had submitted at letter earlier (see below) in which we questioned the narrow criteria upon which the decision was made—i.e. the solvency of the company and the presumption that almost any rate increase is reasonable or else the company will leave rural New Mexico in need. Even given these criteria, we wondered about the information provided by the company to make the rate decision. Were profit margins, the level of reserves, the loss ratios independently confirmed? Was any of that information claimed as proprietary? What cost containment efforts had been made? What is the rate of increase in actual medical costs compared to the rate increase requested?
And most important, is all that information accessible and available to the affected public? In time for meaningful input?
We didn’t get the answers those questions or the many others raised by members of the public. In fact, the audience was discouraged from asking questions, although Chavez said he would meet individually with questioners afterward to give specific answers.
Too bad all the compelling testimony was for naught. Dr. Christopher Fletcher, a family practice doctor from Santa Fe, and a self-styled loyal Blue Cross provider, spoke about his low reimbursement, “birthday surcharges” and his own experience with his BCBS policy. He noted that medical costs had gone up only 5-6% in the past few years-- a far cry from the 21.3% rate increase this year, and the cumulative 72.4% Blue Cross rate increase in the last four years.
A local business owner, Carl Rasik, asked just how he was supposed to stay in business with a $1450 monthly health insurance premium—now with a $1,000 deductible. And a representative from Consumers Union cited the $6.7 billion in surplus held by the company’s parent, HCSC, and questioned its policy of closing its less profitable insurance pools, and creating new ones for healthier customers, thus creating what she called “death spirals,” where rates skyrocketed.
The whole thing has convinced me that we need to broaden the criteria underlying rate setting as states like Pennsylvania have done and insure a more transparent process. That will take changes to state law. I’m going to be working on this in the coming months, hopefully with the help of the insurance commissioner and the attorney general.
After all, New Mexicans are spending a higher percentage of their income on health insurance premiums than almost any other Americans, according to the Agency for Healthcare Research’s Center for Financing, access and Cost Trends.
And yet we can’t act to control rate increases as we phase in the new federal health care reforms? Whoa. There’s something wrong with this picture.
April 22, 2010
File No. 202.182475.1
VIA ELECTRONIC MAIL
Morris J. Chavez,
Superintendent of Insurance Division of Insurance Public Regulation Commission
P.E.R.A. Building
P.O. Box 1269 Santa Fe, NM
87504-1269
Re: Rate Hearing for Blue
Cross/Blue Shield Individual-Plan Rate Increase Request Dear Superintendent
Chavez:
We are writing to request
your urgent consideration of several important matters that have come to our
attention regarding the Blue Cross/Blue Shield of New Mexico's
("BCBSNM") request for an increase of 24.6 percent in individual-plan
premium rates and the hearing you have scheduled on this matter for Monday,
April 26, 2010.
Firstly, we request that
you postpone the hearing on BCBSNM's rate increase until federal regulations
pertinent to your decision on this rate increase request are issued. As you
know, the recently passed federal health care reform legislation, the Patient
Protection and Affordable Care Act ("PPACA"), Public Law, 111-148,
contains provisions relating to federal review of rate making, including the
issuance of regulations for the federal Department of Health and Human
Services' annual review of rate increases in premiums.1 These regulations are due to be issued by the end of this month,
April 2010. It is only reasonable that your hearing be informed by federal law
pertinent to your decision making process.
As a matter of due process
and affording the public adequate opportunity to provide input through access
to relevant materials, we further urge you to postpone this rate increase
hearing. A visit to the Public Regulation Commission's ("PRC") web
site has revealed that the PRC has not posted any information there regarding
this hearing. The page titled "Insurance Hearing Calendar" was last
updated in February 2009.2 No memoranda or other
materials pertinent to this matter are readily available to the public on this
site, either.
In the event that you
decide to go forward with the hearing scheduled for Monday, April 26, we
request that you postpone the issuance of your decision until the regulations
issued pursuant to Section 1003 of PPACA have been released.
Once you hold the hearing,
we ask that you consider several factors that our review of the New Mexico
Statutes and relevant regulations. We understand that you have to determine
whether the rate increase is necessary in terms of whether BCBSNM would remain
solvent if it were denied. Yet we ask you to recognize the leeway, pursuant to
state law and the regulations promulgated by the Division, that you have when
considering whether BCBSNM's rate increase request. The rating standards
contained in Subsection B of Section 59A-17-6 NMSA 1978 statethat "[i]n a
competitive market, rates are presumed not to be excessive." We understand
that, in New Mexico's rural areas, BCBSNM is the only insurer providing
coverage in the individual market–that other insurers have very little presence
in many areas. Have you examined the coverage of BCBSNM, versus other insurers,
in the individual market throughout New Mexico? Is this a competitive market?
On information and belief, we would argue that it is not. Hence, we argue that
the presumption should not be that a proposed rate is reasonable and not
excessive.
In determining whether
rates are reasonable and whether a rate increase is necessary for solvency, do
you have adequate information? Has BCBSNM accurately and transparently
accounted for its current costs? When you request information as to its
finances, does it claim that certain relevant information is proprietary? If
so, then should not the presumption be that it has not complied with the disclosure
requirements that would allow you to make an informed decision as to solvency?
What is BCBCN's
administrative loss ratio for these individual plans? What costs can be cut
before rates need be increased? What portion of administrative losses go to
executive compensation? What amount of premiums goes out of state? We argue
that excessive executive compensation and other cost containment measures
should be addressed before any rate increase is improved.
Is BCBSNM using good
assumptions to projected future costs? How much in premiums does BCBSNM hold in
reserve? Two months' worth? Six months'? Twelve months'? Is the amount in
reserve reasonable in terms of projected costs?
In considering reasonableness of proposed rates, what are the needs of New Mexicans when balanced against BCBSNM's? We argue that a rate is excessive in a noncompetitive market when large profits are maintained while many more New Mexicans go without insurance due to the increase.
We thank you for your
consideration of these many points. In sum, we request that you postpone the
April 26 hearing or, barring that, the issuance of your decision until federal
regulations have been promulgated. We ask that you consider "competitiveness"
in light of the lack of other insurers in rural New Mexico. Finally, we ask
that any solvency review include factors such as BCBSNM's level of transparency
and the interests of New Mexicans.
Sincerely,
Danice M. Picraux, New
Mexico State Representative, District 25
Dede Feldman, New Mexico
State Senator, District 13
Despite these serious efforts, much of the news media has been on "anti" efforts, most recently the letter from Republican legislators asking Attorney General Gary King to file suit to block the reform, and earlier, the failed attempt to get the NM legislature to block the mandate for coverage included in the bill through a constitutional amendment. 
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