The coverage at issue was established in 1996 by the federal Health Insurance Portability and Accountability Act, or HIPAA. A key goal was ensuring that people who lost their jobs were able to remain insured. HIPAA works in tandem with COBRA, a federal law that extends job-based group insurance coverage, entirely at the individual’s expense, for up to three years after a person leaves or loses a job. (COBRA stands for Consolidated Omnibus Budget Reconciliation Act, the 1986 law that created the program.)
Under HIPAA, insurers must offer their most popular coverage options to people whose COBRA coverage has run out, regardless of pre-existing conditions.
The higher premiums charged by the California insurers, which vary by the policyholder’s age and region, add up. For example, Blue Shield’s monthly premium for a family of four in Los Angeles with a 40-year-old primary policyholder is $1,461. That’s $401 a month, or $4,812 a year, above the cap.
Anthem’s 2009 monthly premium for the same family was $1,356 — $296 a month, or $3,552 a year, above the cap.
In response to The Times’ findings, Anthem initiated a review and discovered errors in its rates, spokeswoman Peggy Hinz said.
So far, Anthem has determined that it has been overcharging enrollees ages 60 to 64 since 2006. Anthem said it appeared others had also been overcharged, and it was reviewing charges to all members since 2006. The company is sending letters to members who may have been overcharged and has promised reimbursement for overpayments, with interest. Anthem members with questions may call (800) 636-8991.
Blue Shield, on the other hand, stood by its rates and maintained that it had done nothing wrong.
“We think we are obeying the letter of the law, and there’s never been any indication that we aren’t,” spokesman Tom Epstein said.
Blue Shield, a nonprofit based in San Francisco, said that even with the higher rates it lost about $7 million on its HIPAA coverage last year and expects to lose up to $20 million on such policies this year.
“It’s been a pretty consistent money loser,” Epstein said.
For consumers, HIPAA coverage is expensive even under the state-issued rate structure. People without pre-existing conditions can obtain cheaper health insurance on the open market. Those who buy HIPAA coverage tend to have continuing medical conditions that most insurers would otherwise refuse to cover.
“These are people typically with pre-existing conditions — serious health conditions — who absolutely need health insurance and healthcare but are blocked from the marketplace,” said Rep. Jackie Speier (D-Hillsborough).
Even people with minor medical blemishes find themselves in need of HIPAA’s guaranteed coverage.
One 63-year-old woman in the Bay Area tried to buy insurance on the open market after her COBRA coverage ran out four years ago. But she was rejected for what she called “piddly reasons,” including maintenance chiropractic visits and the use of Fosamax, a widely prescribed drug that helps bones absorb calcium. She ended up with a HIPAA policy through Anthem.
Even with Anthem’s promised rate rollback, she will pay more than $700 a month for her HIPAA coverage — too much, she said, for a policy with a $1,500 deductible.