The state's largest health insurer plans to hit some members with sharp rate increases again next year, blaming changes from the health overhaul and rising medical costs.

Blue Cross and Blue Shield of North Carolina asked state regulators Thursday for permission to increase rates an average of 6.97 percent for its 300,000 individual members in the state. That's the lowest proposed annual increase since 2007. About 28,000 people would see their rates decrease, including women in their early 20s.

But rates for some children, men and older members will increase 30 percent or more.

Assuming the new premiums are approved by the N.C. Department of Insurance this fall, Blue Cross officials plan to reach out to members facing the biggest increases to discuss options such as cheaper plans with higher deductibles. Insurers set rates by using a variety of factors, including age, medical history and where you live.

The latest rate increases are significant because Blue Cross controls most of the state's market for individual health coverage. It is also the dominant provider of employer-based coverage, with 3.7 million members statewide.

"If you have health care, you're going to pay more," said John McDonnell, a principal with Progressive Benefit Solutions in Raleigh, which helps employers buy insurance.

Health law is changing

Some of his clients are facing rate increases of more than 20 percent. And not just from Blue Cross, but from other big providers, including Cigna, Aetna and United Healthcare.

It's partly because of increasing medical costs and more people using expensive services, but also because the new federal health law is forcing changes such as eliminating annual or lifetime limits on coverage, expanding dependent care for children until age 26 and more, McDonnell said.

"With everything that's been added, you can't really expect costs to go down," he said.

The situation isn't likely to improve any time soon. As more provisions of the health overhaul law take affect in 2014, Blue Cross officials said they expect rates to rise further.

"We do expect significant premium volatility in 2014 as the industry moves to an entirely new rating structure," said Patrick Getzen, Blue Cross' chief actuary.

The rising rates will likely force more people in North Carolina to cut back on coverage or go without, said Adam Linker, a policy analyst with the N.C. Justice Center's Health Access Coalition. And some of the additional "safety net" measures of the federal law won't start until 2014, he added.

"I'd like to see insurers take a small hit now and then figure out what adjustments they need to make in 2014," when federal subsidies will help the uninsured afford coverage, Linker said. At that point, health insurers also will get a boost in business from new members.

N.C. Department of Insurance actuaries soon will begin reviewing Blue Cross' rate request, but the agency is limited in its ability to reject higher rates. Officials will examine data from Blue Cross to make sure that the average rates are reasonable, but can't do much for specific members seeing sharp increases because of age or medical history.

"We always scrutinize the requests and make sure the rates are appropriate," said agency spokeswoman Kristin Milam. "We're not going to let any company overcharge someone and arbitrarily raise rates."

As part of the new law, the Insurance Department this month received a $1 million federal grant to analyze and improve its rate-review process. That will include hiring a consulting firm to review its current system. Insurance officials also plan to seek more authority to control rates when the General Assembly returns in January, Milam said.

There are bright spots for some Blue Cross members. About 28,000 individual customers will see lower rates next year. Women ages 21 to 25 will see rates drop about 30 percent.

Rates will increase less than 10 percent for about 60 percent of individuals.

The average individual member pays about $250 a month, according to Blue Cross. That cost will jump to $266.75 with a 6.97 percent increase.

Equity for men, women

Under federal law enacted in March, starting in 2014, insurers can't base differences in rates on sex. Blue Cross officials decided to begin adjusting its -sex-based rates earlier, which will mean decreases for some women and big increases for some men, as the insurer tries to make up the difference. Female members have historically paid more because of factors such as the higher costs related to having babies. As men age they typically start having more medical problems.

Some changes will affect members 25 and younger because the insurer has to have one rate for that entire age group, rather than setting rates by smaller age brackets.

Cost-cutting is a goal

David Swanson of Durham saw the cost of coverage for his daughter increase 50 percent in January. She's starting at UNC-Chapel Hill this weekend and will move to the university's student health plan, which is "significantly cheaper."

But Swanson expects to receive a letter from Blue Cross this fall with another big increase for his son, who is 16. "It would be nice to have more choices, which would allow me to shop around," Swanson said.

The latest request for a rate increase comes as Blue Cross is looking for ways to slash its administrative costs 20 percent, or about $200 million a year, by 2014. The company last week announced that it would lay off up to 90 data-entry workers next year as part of its cost-cutting efforts.

alan.wolf@newsobserver.com or 919-829-4572