Health Insurers Scramble to Keep Healthy Customers - Wall Street Journal

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• TIMOTHY W. MARTIN

Health insurers are making a big push to hang onto their policyholders ahead of new government-run exchanges expected to roll out next week, but state regulators have accused some of misleading those customers in the process.

Several insurers, including Humana Inc. and some Blue Cross Blue Shield plans, have recently warned customers of big rate hikes if they don't immediately renew their policies for 2014.

But some of those customers may be able to find cheaper policies on the insurance exchanges launching under the new federal health law. In some cases, the regulators say, insurers aren't making it clear to consumers that they may switch carriers or shop on the new exchanges.

At issue is a battle for healthy policyholders. Each company wants as many healthy people as possible on its books in hopes that their premiums will help offset an increase in costs from an expected wave of new customers who—with the help of the new health law—will be gaining insurance for the first time and may have health conditions to address.

"This is really about a panic in the insurance industry," said Robert Laszewski, president of Health Policy and Strategy Associates LLC, a health insurer consultant. "What they're gravely worried about is they won't get enough healthy people to pay for the costs of the sick people."

The appeals from insurers are coming mostly in letters that they are required to send to existing holders of individual policies, telling them how their plans will change under the new health law. The health law requires a wider range of benefits be provided by insurers, such as maternity care or mental health treatments.

Some insurers are also using advertisements to urge consumers to stick with them or win new customers from rival carriers. About 19 million Americans are individually insured with plans they buy on their own. Many are self-employed, early retirees or younger adults in between jobs.

The Kentucky Department of Insurance fined Humana earlier this month for instructing existing individual policyholders to renew their current plans for 2014 within 30 days of receiving the letter in late August or be switched to a pricier policy. Humana's letter to 6,500 policyholders in Kentucky was "misleading," the insurance department said.

Humana disclosed only in a footnote that policyholders have the option to enroll in rival plans on the exchanges, and it didn't mention that some policyholders might be eligible for federal subsidies to purchase coverage on the exchanges, the regulator found.

"This letter was preying on people's lack of knowledge about their consumer protections, their rights," said Sharon P. Clark, Kentucky's insurance department commissioner. The regulator fined Louisville-based Humana $65,000.

Similarly, spokesmen for state insurance regulators in Colorado and Missouri said they are looking into complaints from consumers who received letters from Humana.

Humana spokesman Tom Noland said the company's "aim is to be transparent with our customers." He added that the insurer was working closely with Kentucky state officials "to ensure that communications to our customers continue to be clear and interpreted as intended." Mr. Noland said Humana was also working with other states but declined to specify which ones.

Meanwhile, the Arizona Department of Insurance rejected Aetna Inc.'s request to distribute an advertising brochure in the state touting a "one-time opportunity" for savings. The ad read: "Health Care Reform is here. Higher rates can wait."

In a letter to the carrier, the department said the advertisement contained "several misleading and possibly untruthful statements."

An Aetna spokesman said it ended up using previously-approved materials from an earlier campaign as advertising in Arizona.

In letters to current policyholders, two insurers based in Washington state neglected to tell members they could switch carriers or shop on the consumer marketplaces, according to the state's insurance commissioner.

Instead, Premera Blue Cross and its affiliate, LifeWise Health Plan of Washington, only suggested their own 2014 coverage as an option. "If you're happy with this plan, do nothing," the letters state. The letters say some people may be eligible for a "health premium tax credit," but don't mention the exchanges at all.

In response, Mike Kreidler, Washington's insurance commissioner, issued a consumer alert last week after dozens of people complained. "Don't just take what your insurance company says—make sure you shop around," Mr. Kreidler said.

CareFirst BlueCross BlueShield, which sells insurance in Maryland, mailed postcards earlier this month that pitched monthly rates as low as $56. Insurance sold on the exchanges could very well be more expensive "than rates available to you today," reads the CareFirst postcard.

A spokesman for Premera and LifeWise said most customers "are already well aware that there are other options…without us having to spend time reminding them of that basic fact."

A CareFirst BlueCross BlueShield spokesman said the postcard "is part of our continuing efforts to make sure consumers understand and explore their options."

Heather Braden, a 30-year-old part-time nurse from Louisville, Ky., said she currently has her family of four on a bare-bones, high-deductible plan with Humana with a monthly premium of $300.

In a letter dated Aug. 21, Ms. Braden said, Humana told her she had 30 days to renew her current plan at the same price, meaning she would have to decide and sign up before she had a chance to see her options when the state insurance exchange opens Oct. 1. If she failed to meet that deadline, she said Humana said in the letter, she would have to pay $719.88 a month for a Humana plan that is compliant with the new health law.

Ms. Braden said her family couldn't afford that premium on its household annual income of around $80,000. The language in the letter suggests "that it's more affordable to opt out of the exchanges," said Ms. Braden, whose current plan doesn't cover maternity care or her husband's sleep-apnea treatments.

Since she now realizes she doesn't have to comply with the 30-day deadline, Ms. Braden said she plans first to see how much of a subsidy her family qualifies for on the state's insurance exchange. If it isn't much, she said, she will stick with her current Humana plan or look at a medical-sharing plan for people who have religious objections to some provisions of the federal law, she said.

In most states, carriers are tailoring their messages based on the age and potential subsidy eligibility of their policyholders. Letters to younger, healthier members play up expected rate increases to discourage them from shopping on the exchanges. But in some cases insurers say they are encouraging older people to look at their options on the exchanges, where they might find lower rates. Pricing rules under the new health law restrict how much insurers can charge older consumers, in order to spread the risk of costly medical bills across an entire population.

Cigna Corp. says it plans to offer an online guide that determines the best plan for a policyholder in five minutes, based on location, income, expected use of care and preferred payment methods. The best plan might be one offered by the competition, said Raymond Smithberger, Cigna's general manager for individual and family plans."

In some situations, "we know we won't be the best choice for that individual," said Mr. Smithberger. "We're hoping to align the individual to the plan that suits them."

Write to Timothy W. Martin at timothy.martin@wsj.com

A version of this article appeared September 23, 2013, on page B1 in the U.S. edition of The Wall Street Journal, with the headline: Insurers Fight for the Healthy.