[Welcome Industry Radar readers!]
I’m normally fairly circumspect when writing these blogs, but this time I may make an exception. I’m pissed. Blue Cross of California (shortly to be known as Anthem Blue Cross) just announced rates for their Small Business plan focal renewal. These will also be the base (aka "standard") rates for both new business and for renewals from May 1 forward. (Before all California readers panic, the focal renewal only applies to plans originally purchased prior to December 2003. Plans purchased after that won’t see these increases until their normal annual renewal. This also only applies to the Small Business plans, not individuals or groups with more 50 employees)
A bit of background…After years of incessant price increases, Blue Cross announced last November that the average January rates would decrease by roughly 5%. HSA policies would stay flat. Amazing. Finally a bit of stability in this slightly insane business. Needless to say, quite a few clients switched to Blue Cross.
Roll tape forward to now, roughly six months later. Average rate increase statewide: 15.4%. Average increase for HSA and HIA plans: 25.4%. Increase for their most popular plan, the Luminos 1500 HSA plan (and the one I'm on!)? A breathtaking 32%.
Thanks guys.
The increase for the Luminos 1500 wasn’t a surprise. The magnitude is. There's a good reason that it’s one of their most popular plans…it’s the best plan for the premium dollar, and with a low out-of-pocket maximum, it’s even a better deal if a serious medical condition is present. That was obvious to anybody who looked at the plan design. But if that was the case, why hold it at ZERO increase in January, and then go up 32% five months later????
What precisely changed? Is the actuarial department that out to lunch? Or are we looking at marketing games?
The same question applies (although not quite as bad) to their traditional PPO and HMO plans. To go from a 5% decrease to a 12% increase is disconcerting. A carrier should be able to forecast better than that. The typical excuses: The aging of the population causes increased utilization. There are increases in the cost of medical technology. Drug prices went up again. All are true. But we’re talking about a five month period here. And how did these last five months differ from the preceding period, where the rates were held stable and/or declined?
Stability and predictability is incredibly important. I have clients who switched to HSA plans that will now have their budgets completely blown….even after I advised to factor in a 12-15% annual increase in benefit expense. Goodwill generated by the rate decrease just vanished in a large cloud of oily smoke. I think I’m going home and work in the garden.
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