The Los Angeles Times
Hundreds of actors, artists, musicians and writers in California are facing massive increases in their health insurance premiums — a situation that could face other consumers who don’t have employer-sponsored health plans, advocates and lawmakers said.
Cigna Corp., which has sold insurance to members of the entertainment industry through their professional associations for 25 years, is raising premiums for actors and others by an average of 82%, with some hikes as high as 254%.
“It’s outrageous,” said Randall Kahn, 58, a semi-retired actor who lives in Hollywood. He learned that his premium would jump from $649 a month to $1,022, only $15 less than his mortgage payment. “It’s a big burden.”
A Cigna spokeswoman said the premium increases were necessary to cover the costs of anticipated healthcare claims.
“We have a right to raise their rates, and we have the right to raise their rates based on experience,” Cigna‘s Gwyn Dilday said. “They are a large group, and their rates are based on the claims experience of the group.”
Regulators said this week that they were looking into the increases, but their hands may be tied. With the exception of the so-called small-group market, health insurers in California are largely free to set premiums as they see fit.
Consumer advocates and insurance experts said other California consumers could be vulnerable to large rate hikes after a wave of consolidation that has reduced the number of carriers offering coverage in the state.
The remaining carriers have gained increased clout, allowing them to effectively dictate premiums, the advocates and experts said. In addition, they said, insurers are under pressure from Wall Street to keep profit margins high — even if that means shedding members.
Insurers are increasingly adopting a “take-it-or-leave-it strategy,” said Jerry Flanagan, an advocate with the Foundation for Taxpayer and Consumer Rights in Santa Monica. “The market has collapsed so much that insurers left in the game don’t have to offer good rates to big groups.”
State Sen. Sheila Kuehl (D-Los Angeles), a proponent of single-payer universal coverage, said the entertainers’ plight illustrates the vulnerability of consumers under the current “fragmented” system that is largely based on employment.
“Everyone is at risk now,” she said. “People believe that they are secure because they have a job. But, in an employer-based system, you lose your job, you lose your insurance. And even those who are paying a significant premium on their own have no guarantee this won’t happen to them in terms of their premiums being jacked up to an unaffordable place.”
Insurers disagree, saying that competition remains robust. But, they said, all carriers must raise premiums to cover rising medical costs.
The latest controversy involves coverage for more than 600 entertainers, artists and writers in California who don’t have jobs with health benefits or who don’t earn enough to qualify for union-provided insurance. Members of the Screen Actors Guild, for instance, must earn more than $13,000 a year, acting under contract, to qualify for health benefits.
Many of these entertainers, artists and writers would be unable to buy individual insurance in California because carriers often reject applicants with preexisting conditions — including many common health problems associated with aging. The average age of the entertainers and others is over 49 — making it harder for them to qualify.
Instead, they turn to their professional associations, which allow them to buy group coverage. That coverage tends to be more expensive than individual insurance but is guaranteed to all members regardless of health. More than 25 associations make coverage available through the Entertainment Industry Group Insurance Trust, a brokerage based in Clifton Park, N.Y.
David Rubin, a musician who runs the trust with his wife, said Cigna notified him of the changes in late October.
“We were quite shocked, particularly because last year there had been no increase,” he said.
Rubin said the hikes were a result of a change in the way Cigna treated the entertainment groups. For years, he said, Cigna treated the associations as individual groups, and, with 50 or fewer members, most of them qualified as small groups under California law.
Small groups are protected against premium spikes by community rating rules, which bar insurers from charging them premiums more than 10% higher than similar groups.
There are no such rules for large groups, and insurers base premiums on the previous year’s medical claims by members.
“Experience rating should only be applied to large groups,” Rubin said. The great majority of the trust’s member associations have fewer than 20 subscribers, and therefore it should be community rated, he said.
Cigna‘s Dilday said that the large-group market is “highly competitive,” and encouraged the trust to compare Cigna‘s rates with its competitors’.
She said the insurer determined that it was appropriate to use experience ratings to set premiums for the trust.
Cigna contacted the state Department of Managed Health Care and had “not been advised that we have improperly rated this group,” Dilday said.
Department Director Cindy Ehnes said the agency was trying to determine whether it had authority in the matter. “The biggest question is whether small group laws apply to this,” she said.
Flanagan, the consumer advocate, said Cigna‘s change in its treatment of entertainers and others as a single large group might not withstand scrutiny.
“I think they’d be hard pressed to make the case to the regulators that these smaller groups are actually one big group,” he said. “The company can’t unilaterally decide to push the members all into one large group as an excuse for raising rates.”
In other states where the trust has clients, Rubin said, Cigna was not raising premiums as much, but it was cutting back benefits and raising deductibles and co-pays.
“Cigna is doing everything in its power in all of our states to make the insurance so expensive, or cut the benefits so much, that they can force these people out entirely,” Rubin said.
Dilday said she did not know whether Cigna was passing along such large premium hikes to any other groups.
Because of the hikes in California, many of the actors and others involved may be forced to abandon their careers, Rubin said.
“They are very often managing to stay independent as artists and musicians and actors and writers because they can get benefits,” Rubin said. “Without benefits, they have to go into the corporate world, which kills the vocation.”
Zippora Karz, a former soloist with the New York City Ballet, said that because she has juvenile diabetes, she felt lucky several years ago to have found coverage through the trust. But her monthly premium, set to rise 163% to $1,022, is going to be a stretch.
“I have to have health coverage,” said Karz, 41, who teaches ballet in the Los Angeles area. “I have to be able to see my doctors.”
Under the Cigna increases, premiums on its point-of-service plan will rise to $1,022 a month for single members in the Los Angeles area beginning Jan. 1. Family point-of-service coverage would jump to $2,485 a month.
Steve Mooser, president of the Society of Children’s Book Writers and Illustrators, said the premiums would be devastating to some area authors and criticized the insurer for not considering their needs. Insurers, he said, “are no longer willing to gamble, and so they force out people who might actually cost them some money.”
Constance Evans, executive director of the Advertising Photographers of America, said some of the group’s members would be priced out, particularly families whose monthly premiums are set to run as high as $3,685.88 in San Francisco.
“How is anybody supposed to afford that?” she asked.
Screen Actors Guild President Alan Rosenberg sent Gov. Arnold Schwarzenegger a letter Nov. 3 asking for help. He said the migration of television and film shoots to cheaper locales, such as Canada or Eastern Europe, had made it harder for Los Angeles actors to earn enough for guild coverage.
“These are not high-paid celebrities but middle-class actors struggling to get by,” Rosenberg said.
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