Many of the 325,000 North Dakotans insured under Blue Cross Blue Shield will be seeing about a 9.9 percent increase in their healthcare costs next year, the state insurance commissioner's office said Thursday.

Insurance Commissioner Adam Hamm said he approved the 9.9 percent rate increase Tuesday after Blue Cross Blue Shield initially requested a 17.3 percent rate increase.

"I realize that with a 9.9 percent increase, a lot of folks are going to be unhappy," he said. "But the truth is, I nearly cut their rate increase in half."

Hamm, a Republican, took office just over a week ago after being appointed to the position by Gov. John Hoeven. The previous insurance commissioner, Jim Poolman, left at the end of August to become a private consultant to the insurance industry.

The increase approved by Hamm applies to group policies purchased by corporations. Because it represents what the company pays for the policy - and each company is different in how it passes on healthcare costs to its employ ees - not every policyholder will see an exact increase of 9.9 percent in what they pay for coverage.

The 9.9 percent figure came about as part of the annual negotiations between insurers and the insurance commissioner.

Larry Gauper, vice president of corporate communications for Blue Cross Blue Shield of North Dakota, said the company came up with its 17.3 percent request based on modeling of its cost projections for 2008.

Citing an aging population and the increasing costs of medical procedures, Gauper said the increase is a direct representation of the organization's predictions of increased costs. He said the company has a lot of experience with such models, and strives for accuracy.

Hamm's agency begged to differ.

Running the numbers themselves, actuaries at the Insurance Department arrived at 9.9 percent as a reasonable increase.

Hamm said he was further convinced by data showing that Blue Cross Blue Shield increased its net income in four of the six years in which the Insurance Department gave the organization a lower premium increase than it said it needed to break even.

In 2004, for example, Blue Cross Blue Shield asked for a 10.8 percent increase, but was able to increase its net income by $18.6 million with an increase of 8.5 percent.

Gauper said the company always errs on the side of having enough money to pay out all claims, and prior year savings have occurred because not as many people as its models predicted actually got sickgot.

He also said that government holding down rates today could create bigger swings in the future that will make it harder for companies to predict their healthcare costs.

"What employers want most is a leveling of rates," Gauper said. "When rates are held down, there can be a consequence that you have to come back and increase them even more to catch up in subsequent years."

(Reach reporter Jonathan Rivoli at 223-8482 or jonathan.rivoli@bismarcktribune.com.)