Insurance premiums soaring for individual policyholders

With a new survey reporting an average 20% increase, states are scrutinizing what insurers charge. The Obama administration warns that it's watching, too.

By — Posted July 5, 2010

Print  |   Email  |   Respond  |   Reprints  |   Like Facebook  |   Share Twitter  |   Tweet Linkedin

While a much-publicized proposal for a 39% rate hike for individual insurance from WellPoint-owned Anthem Blue Cross in California was widely credited with reinvigorating health system reform, a study finds that the insurer is hardly alone in proposing double-digit-percentage increases.

A Kaiser Family Foundation report, "Survey of People Who Purchase Their Own Insurance," issued June 21, found that 77% of those who buy individual policies were told that their insurance premiums would increase by a proposed average of 20%. The remaining 23% were mostly individuals who had been with their plans one year or less.

Sixty-one percent of individuals surveyed stayed with their plans and paid an average 18% more than they had previously. Another 16% switched to cheaper plans, paying an average of 3% less -- but 49% of those who switched ended up with fewer benefits. The survey said the average individual rate was $3,606 per year, while the average family rate was $7,102.

"With people in the individual market being hit with average increases of 20%, the survey shows that the steep increases we have been reading about over the last several months are not just extreme cases," said Kaiser Family Foundation President and CEO Drew Altman, PhD.

Individual plans cover 14 million Americans, compared with 157 million covered by employer-based insurance.

The Kaiser survey of 1,038 adults, age 18 to 64, was conducted from March 19 to April 2 and asked respondents about their most recent rate increase, which could have been at any time in the previous 12 months. Most responses came on or before March 23, the day President Obama signed health reform into law.

Closer scrutiny after health reform

The Kaiser report noted that individual insurance rates have attracted attention because of their relatively steep rise, and because, until health system reform was passed, individual plans were regulated more lightly than were employer-based plans.

The political reaction to the Kaiser numbers was not as intense as when President Obama and his administration lambasted Anthem's proposed -- later withdrawn -- 39% rate hike in California. However, Obama -- who met after the survey's release with insurance company CEOs and state insurance commissioners to discuss rate increases under health system reform -- warned insurers not to jack up premiums in anticipation of tightening regulations under the new law.

"The CEOs here today need to know that they're going to be required to publicly justify unreasonable premium increases on your websites, as well as the law's new website --," said Obama, referring to a website launched July 1 and designed to allow consumers to get information on insurance plans. "We'll be watching closely."

The president also said he would support states if they kept "excessively expensive plans" out of the health insurance exchanges mandated under the health system reform law.

Insurance industry representatives countered that premium increases had more to do with higher medical costs than with insurance company profits. They noted that the Kaiser report found that people with individual policies tended to be older than those with employer-sponsored plans.

"Medical costs continue to soar," said Robert Zirkelbach, spokesman for America's Health Insurance Plans. "It's important to look at all the factors that are contributing to rising health care costs. It's not health plan administrative costs or profits."

States take action

Some states have tried recently to scrutinize individual insurance hikes.

On June 16, the California Dept. of Insurance said it would have an outside actuary run reviews of rates proposed by the four largest individual health insurance plans. That followed an April actuarial review of Anthem's proposed hike, which ended up uncovering math errors that, when corrected, would have put individual plans under the state minimum medical-loss ratio of 70%.

On June 24, Aetna withdrew its proposed rate hike -- a 19% increase. The health plan said "simple human error" resulted in mathematical mistakes.

Aetna and Anthem Blue Cross have not yet resubmitted rates, according to the California Dept. of Insurance.

On June 22, New Mexico's acting superintendent of insurance, Johnny L. Montoya, signed an order suspending the recently approved average 21.3% rate increase for BlueCross BlueShield of New Mexico. A hearing is scheduled for Aug. 25.

Pennsylvania Gov. Edward G. Rendell announced June 9 that the state's insurance department would investigate the nine largest insurers to determine the cause of several large rate increases in advance of major health system reforms. "We need a smooth transition into 2014, but instead, we are seeing some truly exorbitant rate increases," Rendell said.

Also on June 9, New York Gov. David A. Paterson signed legislation reinstating the ability of that state's insurance department to review and approve health insurance premium increases before they take effect.

In Massachusetts, however, observers said insurers appeared to be getting a break on state attempts to keep premium increases down. On June 24, a state insurance appeals panel overturned the Division of Insurance's rejection, in April, of Harvard Pilgrim Health Care's request for an 8% to 12% increase for small business and individual customers. The appeals panel said the request by the state's second-largest private plan was reasonable, given what it pays hospitals and physicians.

Blue Cross Blue Shield of Massachusetts, Tufts Health Plan and Fallon Community Health Plan also are appealing similar rejections, in April, of double-digit premium increases.

Back to top

External links

"Survey of People Who Purchase Their Own Insurance," Kaiser Family Foundation, June (link)

Information on the new health reform law and on public and private health insurance plans nationwide (link)

Back to top



Read story

Confronting bias against obese patients

Medical educators are starting to raise awareness about how weight-related stigma can impair patient-physician communication and the treatment of obesity. Read story

Read story


American Medical News is ceasing publication after 55 years of serving physicians by keeping them informed of their rapidly changing profession. Read story

Read story

Policing medical practice employees after work

Doctors can try to regulate staff actions outside the office, but they must watch what they try to stamp out and how they do it. Read story

Read story

Diabetes prevention: Set on a course for lifestyle change

The YMCA's evidence-based program is helping prediabetic patients eat right, get active and lose weight. Read story

Read story

Medicaid's muddled preventive care picture

The health system reform law promises no-cost coverage of a lengthy list of screenings and other prevention services, but some beneficiaries still might miss out. Read story

Read story

How to get tax breaks for your medical practice

Federal, state and local governments offer doctors incentives because practices are recognized as economic engines. But physicians must know how and where to find them. Read story

Read story

Advance pay ACOs: A down payment on Medicare's future

Accountable care organizations that pay doctors up-front bring practice improvements, but it's unclear yet if program actuaries will see a return on investment. Read story

Read story

Physician liability: Your team, your legal risk

When health care team members drop the ball, it's often doctors who end up in court. How can physicians improve such care and avoid risks? Read story