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California’s individual health insurance market poised to collapse upon itself

Two newspaper accounts of substantial recent rate increases for individual health insurance premiums approved by the California Department of Insurance this week strongly suggest the segment is in deep trouble and poised to collapse upon itself from both ends.

The stories show that both insurers and consumers believe the segment is growing economically unsustainable amid rapidly rising medical costs.

While Blue Shield of California will boost rates on its individual health insurance policies by an average of 18.2 percent, the nonprofit insurer will still be operating at a loss.  “Even with these increases, we’ll be losing money from our individual policies,” Blue Shield spokesman Tom Epstein told the Sacramento Bee.  Epstein said the red ink could total in the millions of dollars.

Market share leader Anthem Blue Cross will increase rates by 14 to 20 percent effective Oct. 1 for nearly 800,000 individual California policyholders, the Los Angeles Times reports. “It’s already verging on completely unaffordable,” said Mary Feller, 57, of Northern California, told the newspaper.  “If our insurance keeps going up at this rate, we’ll lose it.”  And in a still anemic economy, those rate hikes appear even less affordable.

When selling individual health insurance produces losses for insurers and policyholders can no longer afford the premiums, the market is essentially dead.  The only question is whether it will be pronounced so before 2014 when insurance purchasing exchanges of the Patient Protection and Affordability Act are set to begin operating.  I predict it will.

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