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By Richard Asinof
PROVIDENCE – The rate increase for Direct Pay customers of Blue Cross & Blue Shield of Rhode Island was lowered to 1.9 percent from the proposed 7.9 percent by order of R.I. Health Insurance Commissioner, Christopher F. Koller, on Wednesday.
The rate increases are scheduled to take effect on April 1.
In making his decision, Koller eliminated from the proposed rate increases the cost of contributions to Blue Cross’s reserves, disallowed the costs of a premium tax on commercial insurance and reduced the trend factors for three of eight medical services categories.
Koller also ordered Blue Cross not to apply a rate increase to its customers over the age 65 enrolled in the Direct Pay insurance program, citing equal protection concerns under the 14th Amendment. That decision was reached, in part, based on public testimony by Sam Katzovicz, who raised the issue about the jump in premiums when a person turned 65. Under Blue Cross’s proposed rate hike, a person recently turned 65 could have seen increases from 76 percent to 98 percent – increases that the R.I. Attorney General’s actuary termed “rate shock.”
“This office has to balance the need for solvency of Blue Cross and the lowest rates of increases needed,” said Koller. “The rate increases granted here find that balance. It is not appropriate to have other Blue Cross lines of business subsidize the Direct Pay product but every measure must be taken to keep rate increases low.”
Koller said that the roughly 14,750 Direct Pay customers, who purchase their insurance with no employer contribution, are among the most vulnerable health insurance consumers.
“They stand the most to gain from health care reform.” Koller said, “because of federal subsidies and the introduction of more healthy individuals into the market with an individual mandate. In the mean time, careful rate oversight and the efforts of Blue Cross make our individual market considerably healthier than in almost any other state, many of which are experiencing double digit rate increases.”
Blue Cross may accept the decision or appeal it in court, said Koller.
Blue Cross & Blue Shield of Rhode spokeswoman Laura Calenda said that the health insurance firm was “extremely disappointed” with the Office of the Health Insurance Commissioner’s decision.
“Our filing was actuarially justified and includes our members’ projected medical expenses, as well as the approximately $2 million that BCBSRI incurs to cover state-mandated premium taxes and assessments on Direct Pay,” she said.
“In addition to not covering the cost of our members’ projected medical claims, the 1.9 percent [increase] approved does not even those taxes and assessments, which made up almost half – or 3.6 percent – of the filing. As a non-profit, our only source of funding for taxes and assessments is premium dollars. We have no other revenue sources.
Calenda said that Blue Cross was very sensitive to the needs of its Direct Pay customers, citing some $2.7 million in subsidies given last year to help reduce premiums for such customers. Calenda also said that Blue Cross had taken steps to slow the growth of premium increases and make health care more affordable through efforts to keep hospital reimbursements lower and investments in patient-centered medial homes.