The Cost of Mandatory Maternity Benefits in California

Under CA SB 222, all individual & family health insurance plans in California were required to provide, or add and provide, mandatory maternity coverage to all plan members. 

Prior to July 1, 2012 when the mandate went into effect, plans offering maternity coverage were priced higher in terms of monthly premium to reflect actuarial maternity benefit utilization.  

Because the PPACA allows HHS (federal) to review and approve or reject insurance company rate increases on health plans that are 10% or more, and because the California Insurance Commissioner can make enough bad press for a carrier (he currently does not have rate authority in California--that is pending under AB 52), insurance carriers had to add the benefit and try to make the plans actuarially sound. 

Looking at California's two largest PPO insurers for individual & family plans (HMO plans were and are always required to provide maternity benefits) the effect is a bit stunning.

Blue Shield Life & Health (Blue Shield of California)
On April 17, 2012 I blogged the impending closure and replacement of almost every Blue Shield Life & Health PPO plan.  

The new plans released for July 2012 by Blue Shield Life & Health included the mandated maternity benefits and the competitive premiums for the 'new' PPO plans were initially anywhere from 20-30% above the cost of Blue Cross' similar comparative PPO product.  Initially the Blue Shield plans were a bit difficult to sell against Blue Cross lower premium plans.

As of this writing, Blue Shield Life & Health PPO plans appear stable in the mandated CA market.

Anthem Blue Cross Life & Health (Blue Cross of California)
Unlike Blue Shield, Anthem Blue Cross chose to continue their existing PPO plans into the new mandate and pricing was continued on many plans below the Blue Shield premium levels for comparative coverage.  Rate changes were kept low most likely to avoid HHS rate change scrutiny and bad press.  

The result of not replacing the plans with new plans a higher premium levels (see Blue Shield) has seen the following since March, 2012.

Clear Protection Plus 5000 Closed
CoreGuard Plus 10000 Closed
CoreGuard Plus 7500 Closed
Lumenos HSA 5000 w/Maternity Closed
Clear Protection Plus 1000 Closed

Effective November 1, 2012

SmartSense Plus 1000 standard Rx Closed
SmartSense Plus 1000 upgrade Rx Closed
Lumenos HSA 3000 Single  Closed
Lumenos HSA 4500 Single Closed
Lumenos HSA 3500 Family Closed
Lumenos HSA 1500 Closed

11 PPO plan closures in the last six months.  Members on those PPO plans (except the Lumenos 5000 w/Maternity) are allowed to remain on the plan and in some cases may add new family members.  However, all of these plans are closed for new enrollments except family members as mentioned.

As we move towards full implementation of Healthcare Reform, it will be interesting to see what the insurance carries do both in terms of QHP (Qualified Health Plan) implementation and existing plan pricing.

Dave
www.davefluker.com



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