New health plans, old woes Insurers and clients struggling with Medicare policies.

Posted: December 29, 2006

After 50 years as an Independence Blue Cross subscriber, retired electrical engineer Russell Philipp, 74, is taking his business elsewhere.

The region's largest health insurer eliminated Philipp's plan and suggested that he and his wife, Lois, switch to one that would cost more and cover less.

But what bothers Philipp is that the Philadelphia-based nonprofit organization continues to report a growing surplus that topped a billion dollars last year.

"It really irks me to think they have the surplus and yet they keep raising their premiums and decreasing the coverage," said Philipp, who lives in Broomall.

Health insurers all over the country are struggling with an increasingly difficult funding model for Medicare managed-care plans. In this region, Independence Blue Cross has raised its rates to senior citizens significantly more than its competitors have, according to an Inquirer analysis.

While competitors raised monthly 2007 premiums by no more than 15 percent, or about $12 a month, Independence Blue Cross increased premiums for Medicare health management plans, known as Medicare Advantage plans, anywhere from 54 percent to 93 percent, or from $15 to $46 a month.

"From 2006 to 2007, we got virtually no increase to cover a 9 percent increase in costs," said Dan Lyons, its senior vice president for government programs, referring to the small change in payments that the insurer received from Medicare.

Letters describing plan changes went out to Independence Blue Cross subscribers in October as part of the open-enrollment process. New plans go into effect Monday, and open enrollment ends Sunday.

Over the last few months, Lyons has dispatched a battalion of Independence Blue Cross representatives around the region to explain its premium increases - holding more than 100 town meetings attended by 10,000 senior citizens.

Lyons and his representatives gave the groups a quick lesson in Medicare finance:

The federal government gives health insurers a set amount per enrolled member. The insurers manage that money, negotiating group discounts with hospitals, doctors and pharmacies. They also add extra services, such as vision and dental care. The Medicare payment from the government does not cover the total cost, so premiums and co-pays from subscribers like Philipp make up the difference.

For 2007, the government barely increased the amount it would provide. Meanwhile, medical costs have been going up - widening the gap that has to be covered by premiums and co-pays.

Lyons said that the senior citizens - who gathered earlier this month in Center City's Doubletree Hotel and in the Trevose firehouse in Bucks County - understood the lesson and appreciated Independence's loyalty, even as other insurers have come and gone in the marketplace.

"We do manage this company and our Medicare business very carefully," Lyons said. That includes the surplus, he said. Independence's $1.2 billion surplus, also known as a reserve, has been approved by the Pennsylvania Department of Insurance.

All insurance companies must carry some surplus to cover potential losses; the proper size of the surplus is a matter of debate.

A class-action lawsuit filed on behalf of subscribers and questioning the size and propriety of Independence Blue Cross' surplus continues to make its way through the Pennsylvania court system.

Philipp says he thinks the surplus is high, given the cost of his medical insurance.

The plan that Independence Blue Cross suggested for Philipp - the Keystone 65 Standard Rx Option 2 - would cost $133.70 a month. His former Keystone plan - now discontinued - cost him $120 and had better coverage.

In 2006, the Keystone 65 Standard plan with prescription drug coverage cost subscribers $87 a month. The premium for 2007 represents a 54 percent increase.

Because Option 2 costs more and covers less, Philipp and his wife are switching to an Aetna Medicare Advantage plan. Their premiums will be about $111 a month each and will include more prescription-drug coverage.

Lyons' explanation also did not satisfy a retired recreation worker from South Philadelphia whose premiums rose 93 percent in two years. The recreation worker, like some other senior citizens interviewed, did not want to be identified publicly criticizing his insurance company.

He paid $30 a month for his Keystone 65 Standard coverage in 2005. The same plan cost him $45 in 2006, and, in 2007, he would have to pay $87 - a 93 percent increase. Now he is switching to a Keystone 65 Value Plan, which has a $15-a-month premium and provides less coverage.

Michael Campbell, executive director of the Pennsylvania Health Law Project, said this kind of furor was to be expected when the federal government allowed private companies to be involved in Medicare many years ago - and the situation got even more complex when prescription-drug coverage was extended to Medicare recipients in 2006.

"There is very little standardization," Campbell said. "It's a highly complex system. It's an incredible maze, which even the experts have trouble navigating."

Senior citizens often enroll in multiple plans or don't completely understand what is being covered, he said.

Even though the insurance market is competitive, two-thirds of seniors say they are unlikely to switch plans, according to a study by the Henry J. Kaiser Family Foundation, a California health research organization. Most seniors say that they are satisfied, or that comparing plans is too much trouble. Some say they did not know they could switch.

Nationally, 13 percent of the 43 million people who have Medicare are enrolled in Medicare Advantage plans through nonprofit or for-profit companies like Independence Blue Cross or Aetna. In Pennsylvania, the proportion is higher: One out of four of the state's 2.2 million enrollees are in such plans, according to the Commonwealth Fund, a Washington-based think tank.

Mohit Ghose, vice president of public affairs for America's Health Insurance Plans, a Washington trade group for health insurers, said that the number of enrollees proved that seniors were able to navigate the plans.

"Regardless of the premium structure . . . Medicare Advantage beneficiaries tend to have far more comprehensive coverage and tend to have significantly lower out-of-pocket costs," he said.

Retired saleswoman Sue Cellini, 81, of South Philadelphia, said she was not sure why her Independence Blue Cross Keystone 65 premiums went up so much. When she received her increase letter in October, she said she thought: "Wow, that's kind of expensive for me."

So she is banking on her continued good health and switching to Independence's Keystone Value Plan, trading a lower premium for assuming more risk with a higher deductible.

"If my health keeps where I am, I may be able to stay with them," she said. "I feel as though I may be lucky this year."

Contact staff writer Jane M. Von Bergen at 215-854-2769 or jvonbergen@phillynews.com.

About Medicare Advantage

Once called Medicare+Choice, the Medicare Advantage program involves private health plans offered by nonprofit and for-profit insurers. About 13 percent of Medicare recipients are enrolled in Medicare Advantage plans.

The federal government pays those private plans a fixed rate for each enrollee to pay for Part A (hospitalization) and Part B (doctor's visits) benefits. Senior citizens pay premiums and co-payments.

The government contribution varies by county, by the health of the enrollees, by the cost of medical care in an area, and by demographics. These factors change periodically.

Some Medicare Advantage plans include Part D prescription-drug benefits.

There are special-needs programs for those who are disabled or poor. These dual Medicaid and Medicare plans cover most costs.

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