THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Tuesday, October 11, 1994 TAG: 9410110295
SECTION: BUSINESS PAGE: D01 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: RICHMOND LENGTH: Medium: 83 lines
The state's largest health insurer says it must raise rates for individual policyholders so that it can stay afloat in the competitive and more lucrative group policy business.
Trigon Blue Cross and Blue Shield's rate increases come less than three weeks after state regulators fined the insurer $5 million for unfair billing practices and ordered it to pay customers refunds, which could add up to millions more.
Trigon's group rates rose 0.1 percent in the first half of 1994, while the rate for its largest individual policy jumped 7.4 percent. The increases for people covered by Trigon's biggest Medicare supplement policy were more than 9 percent.
At the same time, Richmond-based Trigon's individual policyholders also get a smaller proportion of their premium dollar back in claims than do those covered by group policies.
Trigon's executive vice president, C. Wyndham Kidd, said higher overhead costs for individual policies are a factor in the lower payout rates.
``It is more expensive to administer, sell and market nongroup (policies) one at a time,'' he said.
Most Trigon customers are covered through group policies sold to their employers. Kidd said that if other insurers want to aggressively pursue the most profitable customers, which are businesses that purchase group plans, then Trigon has to be willing to match rates or lose business.
``We can't just go in there and decide we want to go into this market and sell this product and make this much money,'' he said. ``We're operating in a marketplace.''
But some consumer advocates said the pattern of rising premium rates and lower payouts to individual policyholders is unfair. Trigon gets a multimillion-dollar annual state tax break for selling insurance to anyone who wants to buy it.
``I'm concerned about whether people who don't have a group's purchasing power to get them the best rate are being treated fairly,'' said Jean Ann Fox, president of the Virginia Citizens Consumer Counsel.
Kathleen O'Reilly, director of the National Insurance Consumers Organization, said individuals should not have to subsidize lower rates for businesses and other groups.
Trigon's filings with the state Bureau of Insurance show that the company paid people covered by group policies 84 cents for every dollar paid in premiums. Under the ``Healthy Virginian'' policy, its biggest policy for individuals, the company paid 66 cents in claims for every premium dollar last year.
The insurer paid 73 cents for every premium dollar under its largest Medicare supplement policy. Four of Trigon's newest Medicare supplement policies had payouts of between 32 and 44 cents for every premium dollar.
Norwood H. Davis, Trigon's chairman and chief executive officer, said the company's focus on trying to hold down group premiums was behind the now-abandoned practice of not passing on discounts it had negotiated with hospitals when calculating customers' share of their bills.
Trigon was fined $5 million by the State Corporation Commission last month and ordered to provide refunds to customers.
Insurers usually have some gap between group and individual policies payout rates, said Jim Hunt, a former insurance commissioner of Vermont who is now a consulting actuary in Massachusetts.
Occasionally, individual policies have higher claims payout rates, he said. But because most Medicare supplement plans do not have managed care features that help hold down expense claims, insurers tend to be under pressure to boost rates faster for them than for group plans, Hunt said. ILLUSTRATION: Color graphic
TRIGON
The average amount the insurer pays for every dollar paid in
premiums for group policies and the ``Healthy Virginian'' policy,
the company's largest policy for individuals:
Group Policies: 84 cents
Individual Policy: 66 cents
KEYWORDS: TRIGON BLUE CROSS AND BLUE SHIELD
by CNB