Double-digit health insurance hikes

Bill Graves

Jul. 20, 2008 (McClatchy-Tribune Regional News delivered by Newstex) -- Double-digit rate increases are squeezing tens of thousands of Oregonians who buy individual or small-business health insurance, forcing some to join the ranks of the uninsured.

At least 19 health insurers have filed for rate increases since Jan. 1, when the state for the first time publicly posted rate filings under a new law. LifeWise Health Plan of Oregon received the biggest annual rate increase -- 28 percent for individuals and 26 percent for small employers -- which takes effect in the next two months.

The latest rate boosts are symptomatic of a "very sick health care system," says Bill Kramer, a Portland health care consultant. "With these increasing costs, there are going to be more people who can't afford coverage and can't get access to care. That will result in lost work time, lower productivity, and some people will get very sick and die unnecessarily."

And the rate increases get bigger the older you get because aging puts you more at risk for health problems.

Regence BlueCross BlueShield of Oregon, for example, raised its individual rates on July 1 by an average 26 percent. But it was even a bigger jump for Wanda Harris, 60, of Medford. She saw her monthly premium shoot up by 45 percent, from $386 to $559.

"I just can't pay $559 a month," says Harris, who lives in a mobile home with her partner, Peter Farrow, and depends on a small investment income and her widow's Social Security to pay the bills. "I let the policy go on July 1, and I'm going to hope we get a president who helps us."

Most Oregonians, about 2.7 million, get their health insurance through federal Medicare, Medicaid or large group plans provided by employers. But the 431,000 who are insured through plans for individuals or for businesses with 50 or fewer employees are most vulnerable to volatile rate changes and account for a disproportionate share of those losing insurance.

Roughly 600,000 Oregonians -- about 116,000 of them children -- have no insurance. The employers of these families don't provide insurance, or they are not poor enough to qualify for coverage by the state's health plan.

People insured by individual or small group plans pay widely varying rates for premiums according to their health and age. But they generally pay more than their counterparts in the large group market because they have less negotiating clout.

The percentage of businesses offering insurance nationwide dropped by 8 percent between 2000 and 2006, according to a Kaiser Family Foundation study. Small employers accounted for most of that drop. During the same period, health insurance premiums climbed by 87 percent.

Mike Roach, 58, co-owner of Paloma Clothing in Southwest Portland, pays about $30,000 a year to offer health insurance to eight of 12 employees, an amount approaching what he pays to rent his store space. He expects the cost to rise $4,800 next year.

"It puts locally owned businesses at a tremendous disadvantage in trying to attract quality employees," Roach says. . "

Confronting rising health care costs tops the agenda of the National Federations of Independent Businesses in Oregon and nationwide, says Harlan Levy, the Oregon director.

"I'm hearing from my members that the increases are becoming unsustainable," he says.

Insurers say they are being forced to raise rates, often dramatically, to keep pace with rising health care costs and a population that needs more health care as it ages and too often continues to smoke, eats poorly and makes other unhealthy choices.

"We don't take the increases lightly," says Deana Strunk, spokeswoman for LifeWise Health Plan of Oregon, which insures 75,000 Oregonians in individual and small employer plans. "We need to improve our health and make better lifestyle choices."

Kaiser Foundation Health Plan of the Northwest has kept its rate increases down to single digits most years, including a 6.5 percent bump for individual plans in May, by controlling health care costs through its own health centers and doctors, says Sue Hennessy, vice president for health plan services.

"We have insurance and care delivery integrated," she says. "We need to become extremely efficient so we can moderate all rate increases."

Critics say health insurers raise rates to push out people more likely to be ill and expensive. But Scott Kipper, administrator for the Oregon Insurance Division, says that strategy would backfire because higher rates would drive away only people healthy enough to shop elsewhere. Those with health problems would try to hang on, knowing no other insurer would take them, he says.

That's the case for Mattie Ludwig, 64, of Myrtle Creek, who struggles to keep up with her LifeWise health insurance, now at $544 a month and expected to rise to $624 next month. Because she has diabetes, she knows that if she drops LifeWise, no other insurer will take her.

So she will spend the full $600 she earns each month as an in-home caregiver to pay her insurance until she turns 65 next spring and becomes eligible for Medicare. "I'll keep it as long as I can," she says. "I have 101/2 months to go."

She lives with her 80-year-old husband in a mobile home and depends on his Social Security for living expenses.

The state Insurance Division regulates only rates of individual and small-employer insurers, as well as plans for people who leave their jobs. The state figures large companies have enough clout to negotiate rates for themselves. Under a 2007 law, the division is for the first time posting details of rate filings on its Web site.

The public disclosure has drawn the state's first rate challenge. Karen Kirsch of Portland, with help from her husband, Larry Kirsch, a health economist, is challenging the 26 percent rate increase granted this month to Regence BlueCross BlueShield. She will get a hearing before a state administrative judge.

Rising health insurance costs help drive the growing political momentum for health care reform, says Kramer, also a consultant to the Oregon Health Fund Board, a panel developing a plan for the 2009 Legislature to overhaul Oregon's health care system.

"The challenge is how far we can go and how much we are willing to invest," he says. "Fixing this is not easy and not cheap."

Newstex ID: KRTB-0165-26807046