The price of insurance covering health care costs that Medicare won’t pay has skyrocketed in the last year, with increases commonly ranging from 20 percent to 40 percent, a consumer group said Thursday.
As a result, the report contended, many elderly people may have to cancel their supplemental Medigap policies at a time of possible cutbacks in Medicare coverage.
“The sharp increases in Medigap insurance premiums are a threatening prospect for many Americans,” said Families USA Executive Director Ron Pollack. “When premiums increase 20, 30 and 40 percent in one year, many of our nation’s elderly are going to be squeezed out of the Medigap market.”
About three-quarters of senior citizens have a Medigap policy to cover items that Medicare does not, such as deductibles or prescription drugs.
Families USA a liberal advocacy group on health care issues - analyzed premium increases between 1995 and 1996 for Medigap in 35 states for Prudential and Blue Cross-Blue Shield, the two companies that underwrite more than 50 percent of the $12 billion Medigap market.
Prudential’s program cooperates with the 30-million member American Association of Retired Persons, and has the largest Medigap sales. Its premiums in the states surveyed increased an average of 23 percent, or nine times faster than Social Security benefits rose.
The increase in Washington was 14 percent, in Idaho 12 percent.
At a news conference in Spokane, retirees Julian Powers and Jane Cunningham said the hikes were unfair when insurance companies take one-third of every premium dollar for administration and profit.
Cunningham said she is in good health and has the least expensive plan available, but the trade-off is the risk she takes in the event of a catastrophic illness.
Powers said national health care plans in other developed countries hold administrative costs to as little as 2 percent.
“They’re more conscious of the money than they are with the care,” he said of U.S. insurance companies.
Washington Citizen Action spokesman John Wible said the group favors measures that would increase the share of premium dollars that pay for care instead of overhead.
A spokesman for Washington Insurance Commissioner Deborah Senn said the office is trying to develop guidelines for setting premiums that discourage excessive administrative expenditures.
Cher Descautel, spokeswoman for Medical Service Corp. of Eastern Washington, said some of the year-to-year comparisons may have been skewed by the mandatory elimination of rating systems that segregated different age groups.
Lumping young and old retirees together, she said, increased premiums for those near age 65 but cut them for older people.
Washington and Idaho retirees were fortunate by comparison with those in California, home of 10 percent of the nation’s elderly population.
There, the annual premium for Prudential’s basic plan rose 37 percent to $774 in 1996, up from $552 in 1995.
But its most popular plan, with more benefits, increased premiums in California by 39 percent to $1,614, up from $1,161. That’s equal to more than two months of Social Security checks for the average single person.
Elsewhere, Prudential’s increases ranged from 40 percent in Hawaii to 26 percent in South Carolina. Plans in some states were more expensive in urban areas than rural areas.
Premiums for Blue Cross-Blue Shield increased less than Prudential’s, but still outpaced Medicare inflation or Social Security cost-of-living adjustments in many states.
There were no increases in Washington. The Idaho hikes averaged about 15 percent.
Prudential and AARP spokesmen said the report was accurate but noted that its premiums did not increase in 1995, and that it gave some refunds or credits in 1994.
Ted Bobrow of AARP noted that Prudential’s plan, unlike other policies, charges everyone the same rate regardless of age and health status.