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INSURERS AIR REASONS FOR RATE INCREASES HEARINGS TARGET REQUESTS OF HEALTH ORGANIZATIONS

Health insurers Monday defended their requests for premium increases, but most of the people listening were their competitors or government officials.

The public, for the most part, stayed home.

Blue Shield of Western New York is seeking an average 17.1 percent increase for its contracts. Blue Cross wants a 6 percent increase. And Community Blue, the health maintenance organization owned by Blue Cross, is requesting a 1.2 percent increase.

The state Insurance Department granted the non-profit insurers rate increases last January. If the proposed increases are approved, Blue Shield's rates will have increased 40 percent and Blue Cross' 25 percent over the last year.

"Why are these increases necessary? The reason is simple. Health care costs are on the increase and will continue to increase," John Manyon, president of Blue Shield, said at state hearings in Buffalo to review the requests.

He described a health-care system out of control and attributed spiraling costs to increased physician fees, increased use of medical services, new and expensive technology, the practice of defensive medicine to avoid malpractice lawsuits, an aging population and unhealthy lifestyles, among other things.

For instance, he said the average cost of a hospital admission will increase from $2,960 to $3,508 in 1991.

He even placed blame on the media.

"(Health stories) have created a cycle of awareness and demand that has increased the use of health services," Manyon said.

Officials at Blue Shield, which reported a $6.5 million loss in 1989, have said the rate increase also would help bring reserves up to a level mandated by the state.

The state may increase health insurance rates for Blue Cross by more than its request because the proposed rates would leave the company in 1991 with a $27.6 million loss -- $17.7 million for Blue Cross and $9.9 million for Community Blue, its health maintenance organization.

But a Blue Cross official said the insurer could cover the loss with its reserves and still end the year with a $30 million surplus.

"The fact that the superintendent (of insurance) may take exception to the rates as requested does not mean that there is a conflict in what is to be accomplished by this request," said Francis E. Hayes, acting president of Blue Cross. "By our rate filing, we have attempted to minimize premium increases, maintain affordability and remain fiscally sound."

City and county officials opposed the premium increases.

James Kane, executive assistant to the superintendent of Buffalo schools, said the increases will cost the district $1.5 million and are unacceptable at a time when the state plans to cut school aid by as much as $4.6 million.

"Health care is the fastest growing and least controllable part of our budget. The state must take a firm stance against increases. Otherwise, they'll promote deficit budgets, limited services and increased taxes," said Daniel Bohen, commissioner of Buffalo's Department of General Services.

He asked the insurers to look first at cutting the amount of money spent on administration, advertising and physicians.

William Cosentino of the Town of Tonawanda, the only individual subscriber who spoke at the hearings, said it was time for insurers to do more to control rising hospital costs and doctor fees.

"Insurance premiums are like taxes. We should not be considering increases. We should be looking to cut spending," he said.

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