July 14-20, 2005

city beat

Coverage Up

Philly's working poor are now shelling out more for health insurance.

by Kevin Haney

Every month, nearly 1,300 of Philadelphia's neediest workers dig deep into their own thin pockets to pay for health insurance through the state-designed adultBasic plan. Rather than wait on a list for a state subsidy without any coverage, up until this month they paid $240 a month to Independence Blue Cross for a plan that covers doctor visits and hospital stays. Today, however, they find themselves paying more than $300 a month.

The 25 percent increase — more than double last year's average national raise in premiums — leaves consumer advocates feeling sick. They know those workers are shelling out extra cash while the local Blue plan holds somewhere between $840 million and $1.2 billion in surplus.

"That $240, that's a very difficult nut to make; $300 is going to be ... impossible," says John Dodds, director of the Philadelphia Unemployment Project, a nonprofit that helps the jobless seek government help and deal with creditors.

Dodds says he expects a good number won't make the new nut. Instead, they'll join more than 17,000 residents sitting on the adultBasic waiting list without any coverage, forced to gamble on their own lives until the state has enough money to subsidize their health insurance. These are individual adults who work jobs such as retail clerks, office workers and janitors, making no more than $19,140 a year, the ceiling for the adultBasic plan for a single person.

Those fortunate enough to get into the state-subsidized plan — as of June, there were 5,900 in the city — pay $32 a month to Blue Cross for the same coverage, which doesn't have benefits for prescription drugs or mental health. The state picks up the difference between the co-pay and full premium for those subsidized policyholders, covered by Blue subsidiary Keystone Health Plan East. The money comes from ongoing payouts from the state's tobacco settlement and tax revenues.

Those 1,300 people will shell out an extra $900,000 through next July. Meanwhile, the local Blue sits on a surplus that it calculates at more than $840 million. Consumer advocates estimate it's closer to $1.2 billion, when surpluses from Blue subsidiaries and affiliates are included and some of Blue's accounting methods are adjusted to reflect general business practices. Independence Blue, a nonprofit insurer, has the biggest piece of the local health insurance market, estimated at 67 percent.

Consumer advocates are already in Commonwealth Court and before the state Supreme Court, working alongside some small businesses, to force Insurance Commissioner M. Diane Koken to order all of the state's Blues to cut their surpluses. Consumer advocates want the Blues to use that extra money to extend their coverage to more people on the adult Basic waiting list. (The Blues are a network of nonprofit regional insurers established under state law in the 1930s.)

In February, Koken rejected a petition that claimed the surpluses were excessive. She ruled that the surpluses, estimated at up to $6 billion statewide, were reasonable, and that they were needed for dire emergencies, such as biological terrorist attacks or pandemics such as avian flu. But advocates give a different financial diagnosis.

"It's outrageous," says Beth McConnell, director of Pennsylvania Public Interest Research Group, one of the groups appealing Koken's ruling to Commonwealth Court. "It's not going to the people that need it. The Blues and their subsidiaries are stronger, but our health system isn't."

McConnell notes that even from 1998 through 2002, when the local Blue posted losses, its surplus continued to grow. Blue spokeswoman Liz Williams counters that a study released last month, done by a consulting group hired by the nonpartisan state Legislative Budget and Finance Committee, endorsed Koken and the Blues' position. She noted the consultants from the Lewin Group agreed completely with the insurer's arguments and that Independence Blue was the only local insurer to submit a proposal for adultBasic coverage. The local insurer already subsidizes the administrative cost of the plan, she says.

Williams also pointed to a February announcement, in which the local Blue agreed with the three other Blues in the state to increase their uninsured coverage by $85 million statewide this year.

Knowing for sure whether those 1,300 Philadelphians truly need to pay an extra 25 percent a month is hard to calculate. Insurance Department officials refused last week to release information from the newly signed yearly adultBasic contract, saying it would hurt the Blue in competition with other insurers. They said that department analysts agreed with Blue's overall argument that people on adultBasic simply cost the insurer more.

But Kevin Prindiville, a staff attorney with the local Health Law Project, was suspicious. The one-year increase was beyond even cost hikes Medicare and Medicaid, which cover the elderly and disabled, who tend to have more health problems.

The adultBasic policyholders are typically healthier, he says.

But as of this month, their finances aren't.