Last week the Obama administration, Congress, and the California state insurance commissioner all took aim at Anthem Blue Cross in the wake of reports that the company was raising rates on individual subscribers by as much as 39 percent.
The company has responded to a letter from Sebelius demanding information.
Financial woes have pushed healthier people to drop coverage or buy cheaper plans, the company argued to Sebelius, who had demanded an explanation this week for the company's decision to raise premiums by as much as 39 percent. As a result of losing those customers and holding on to sicker ones, the insurer said, its individual business in California operated at a loss during 2009 and an increase in rates would cover the anticipated shortfall this year.
"While this dynamic always exists, in a challenging economy it becomes more prevalent as individuals who are paying for coverage without a government or employer subsidy must choose to continue coverage or use the money for other necessities," wrote Brian A. Sassi, president and CEO of the consumer business unit at WellPoint, Anthem's parent company.
Precisely why healthcare reform has to happen--insurers will continue to claim that market forces will force them to price their product out of the reach of the people who need it most. There just aren't the profits, they argue, in the market of healthier people. It would seem that the option of being in the business of creating more affordable plans for everyone--including the healthy customers they say they are losing, isn't profit-maximizing enough.
How much profit does Wellpoint (Anthem's parent company) need? As Sebelius pointed out in her response to the letter, their profit is already obscene.
"It remains difficult to understand how a company that made $2.7 billion in the last quarter of 2009 alone can justify massive increases that will leave consumers with nothing but bad options: pay more for coverage, cut back on benefits or join the ranks of the uninsured. High health care costs alone cannot account for a premium increase that is 10 times higher than national health spending growth," she said in a statement.
"Without comprehensive reform, fewer people will be able to afford health insurance and Anthem's decision to raise their rates only demonstrates the urgent need for real reforms that fix our broken health insurance system. Reform will end the worst insurance company practices and put doctors and patients — not insurance companies — in charge of medical decisions. If we fail to implement reform, insurance companies will continue to prosper while families will continue to struggle."
As if it wasn't all galling enough, Wellpoint CEO Angela Braly told the WSJ, with crocodile tears following, that there just wouldn't be any choice but to start over with reform.
The tragedy, as she sees it, is what "a wasted opportunity" it all turned out to be. "Health-care reform" soon became "health-insurance reform" exclusively. "It was a pivot that was—unfortunate," she says, "because it is not going to solve the longer-term problem."
It's hard to see how WellPoint could be to blame for surging health spending, Mrs. Braly says, when 85 cents out of every premium dollar or more "is paid out in the actual cost of care, doctors, hospitals, suppliers, drugs, devices." Confiscating the 2009 profits of the entire insurance industry would pay for two days of U.S. health care.
That, after the industry fought tooth and nail over the proposal that would have made this health care reform rather than insurance reform--the element that actually had the chance to create an alternative, public-based system. The bills as they exist without the public option, but particularly the House bill with its national exchange, would at least curb some of the worst abuses of insurers. Given their attitude toward their customers and toward the reform process, the least Congress should do is pass the House's reconciliation fix, then pass the Senate bill.
Update: A reader sends this e-mail, which was sent to the LA Times in response to their story on the rate increase. It reads in part:
On February 4, you reported on Athem's rate increase:
"Anthem Blue Cross dramatically raising rates for Californians with individual health policies"
As a result of this news, perhaps from you, the White House opened an investigation into the hike.
I want to report a 20% rate hike from my health insurer, HealthNet, Woodland Hills, CA. My premium increases $85 to $511.68, effective March 1. The announcement letter reads: "The same percentage increase applies to all members on the plan."
In February of 2009, my premium was $389.38. (They increased the premium again in July 2010 in honor of my birthday.) The newest rate represents a 31.4% increase since February a year ago. (If my math is correct.)
This policy has a $4800 deductible. I am self-employed, so must seek health insurance on my own.
I suppose 20% doesn't seem shocking to those who got a 39% increase, but it sure is shocking to me. Especially since I never use the insurance due to the high deductible. They won't even allow me to remove the maternity benefit from my policy (I'm over 50) to achieve a lower rate without going back to underwriting. My agent says I wouldn't get a new policy without paying an even higher premium.
