Aug. 18--The state's largest health insurer wants a 10 percent raise in the base rate it uses to set premiums for about 27,800 members insured through small businesses.
Highmark Inc. is asking the state Insurance Department to approve the increase on small-group plans, bought by employers with 2 to 50 workers, that will renew during the October-December quarter, according to a filing with the department posted online on Friday.
The insurer would generate $10.6 million annually, if approved, from about one-in-10 of its estimated 277,000 small-group members across the state. The remaining 90 percent renew at other times of the year, primarily January and July.
It is not known whether those groups could be hit with similar increases but health care costs continue to rise, the reason Highmark cited for its request.
Business advocates said the move could be disastrous for strapped small employers and their workers.
"I understand the complexity of an issue when an insurer says it needs an increase, but right now, passing on any cost increases will simply force more small businesses to drop insurance completely," said Marilyn Landis, owner of Basic Business Concepts Inc. in the North Side and a board member of the National Small Business Association. "Ten percent is a huge increase."
Because the base rate could increase by 10 percent doesn't mean premiums would rise by that amount, Highmark spokeswoman Kristin Ash said. Highmark uses the base rate to determine premiums, which can adjust up or down depending on a group's medical history and utilization of medical services, she said. Highmark increased base rates on these plans by a similar percentage last year, Ash said.
This the first time that Highmark and other health insurers that offer small groups plans must submit rate increases to the Insurance Department for review, department
spokeswoman Melissa Fox said.
A state law approved last year gave the department expanded power to review small business health insurance rates. The federal government, under the 2010 Patient Protection and Affordable Care Act, reviewed large rate increases on small businesses until state lawmakers passed Pennsylvania's law.
Highmark is the only insurer in Western Pennsylvania to file a small-group rate request so far, but the department expects others to do so, Fox said.
Highmark has pending requests before the department to hike by 10 percent rates on several individual plans for people with chronic health conditions.
In filings the department made public Aug. 10, Highmark said it wants to raise monthly premiums starting Jan. 1 for more than 38,700 members who buy their own insurance. The move would generate more than $15 million for the company, the filings showed.
Highmark, which had $4.1 billion in reserve at the end of last year, is spending $1 billion to establish an integrated health system to compete with UPMC, the region's dominant provider of medical services.
Highmark's health system could include the five-hospital West Penn Allegheny Health System, if the Insurance Department approves its $475 million deal for the system, plus Jefferson Regional Medical Center, a number of physician practices, outpatient centers, medical malls, and other facilities in the Pittsburgh region.
Landis, who through her business provides chief financial officer services to small businesses, said she sees directly the tough financial situation many businesses find themselves in as they continue to struggle through the slow economic recovery.
"Most small businesses have seen no increase in top-line sales and have taken deep cuts in profitability," she said. Whether or not Highmark has legitimate reasons for raising rates, most small businesses can't absorb higher health insurance costs without dropping coverage or cutting workers, she said.
"Whatever their reasons are, it's going to force many small businesses to either cut benefits or payroll."
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or email@example.com.
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