Uncategorized

Wellpoint and Their “39%” Rate Increase

Wellpoint is getting killed in the press over a “39%” rate increase for their individual health insurance block in California.

HHS Secretary Sebelius has pointed to the Wellpoint individual rate increases demanding an explanation. The President even brought it up in his interview on Sunday. At a time Democrats are fond of calling insurance executives “villains” this story just adds more fuel to the fire.

No less than five reporters  called me the day the story broke asking me to explain it all.

Falling back on my industry experience it is probable:

  • The “39%” headline is anecdotally the biggest increase the press has found—the average is probably less albeit in the high 20% range.
  • This is likely driven by a combination of increasing medical cost trend, a bad economy, and anti-selection as healthier people disproportionately drop their coverage leaving a sicker group in the pool.
  • The rate increase is probably “defensible,” at least actuarially, based upon the actual experience in that block.

When the day is done this probably says more about why systemic health care reform is so critical than about any one company’s behavior. Last week we heard national health care spending skyrocketed to 17.3% of the economy. This is a real life example of what that macroeconomic statistic really means.

But I am not about to defend Wellpoint having been burned once. A few years ago Lisa Girion of the Los Angeles Times called me to say Wellpoint was retroactively rescinding health insurance policies for inadvertent and immaterial mistakes people had made on their health insurance applications. Falling back on my years of industry experience, I said that couldn’t be true—only the sleazy insurers pulled that sort of thing, Blue Cross of California would never do that.

Of course, Lisa was right and it was the beginning of the California rescission controversy. Not what I would call the best example of public relations at a time the country was debating the industry’s future.

So, what Wellpoint needs to do, and do yesterday, about these increases is to be transparent. Put all of the facts on the table. Is this another symptom of a health care system run amuck or the actions of a “villainous” insurance company?

Just what is it that Wellpoint is waiting for?

****

Update:

Perhaps this is what they were waiting for. Here’s what happens when you stand there like a deer in the headlights and let events take over.

From the LA Times today:

Congress opened an investigation Tuesday into Anthem Blue Cross’ rate increases in California as President Obama cited the company’s premium hikes — some as high as 39% — in his bid to pass national healthcare legislation.

The House Committee on Energy and Commerce and its Subcommittee on Oversight and Investigations announced they are examining the increases, which are set to take effect March 1. Anthem is the state’s largest for-profit insurer and a unit of Indianapolis health insurance giant Wellpoint Inc.

Committee Chairman Rep. Henry Waxman (D-Beverly Hills) and subcommittee Chairman Rep. Bart Stupak (D-Mich) asked WellPoint’s chief executive, Angela F. Braly, to appear at a Feb. 24 hearing of the subcommittee in Washington. They requested that she provide a detailed explanation of the reasons for the rate increases, which have enraged policyholders.

Livongo’s Post Ad Banner 728*90
Spread the love

45 replies »

  1. of adults who are oinnle and have ever used the Internet to look for health information has increased to 88% in 2012, there is little doubt that information made available through these tablets will be valued by the

  2. Sam:
    I think insurance companies are likely to sell policies as long as they do at least a little better than breaking even.
    It also seems reasonable to regulate insurers such that will not be able to continue the policy of not telling healthcare providers and patients “up front” what they will be paid for a service. The way it works now is that the insurance companies decide what they will pay after the service is provided (and only if they feel like it). They, of course, rationalize this by justifying denials and the trimming of providers’ bills on the basis of “medical necessity”. If Congress passes a healthcare reform bill that does nothing to make concrete what healthcare providers must be paid per unit of service, then 30 million more Americans will have the same lousy insurance that everybody else has had for the last 20 years. It almost forces providers to demand payment up front from the patient in order to avoid having the insurance companies “shift the risk” to the doctors, and avoid having the providers being “ripped off” and kept “hungry” (and therefore being willing to accept lousy deals). Health reform needs not only to address access but also to address current insurance payment practices.

  3. You can pas legislation banning rescissions, limiting premiums and banning pre-existing conditions. These are all great ideas, but will probably happen is that these companies will simnply stop selling indivdual policies. Then what?

  4. You can pas legislation banning rescissions, limiting premiums and banning pre-existing conditions. These are all great ideas, but will probably happen is that these companies will simnply stop selling indivdual policies. Then what?

  5. You can pas legislation banning rescissions, limiting premiums and banning pre-existing conditions. These are all great ideas, but will probably happen is that these companies will simnply stop selling indivdual policies. Then what?

  6. You can pas legislation banning rescissions, limiting premiums and banning pre-existing conditions. These are all great ideas, but will probably happen is that these companies will simnply stop selling indivdual policies. Then what?

  7. You can pas legislation banning rescissions, limiting premiums and banning pre-existing conditions. These are all great ideas, but will probably happen is that these companies will simnply stop selling indivdual policies. Then what?

  8. You can pas legislation banning rescissions, limiting premiums and banning pre-existing conditions. These are all great ideas, but will probably happen is that these companies will simnply stop selling indivdual policies. Then what?

  9. You can pas legislation banning rescissions, limiting premiums and banning pre-existing conditions. These are all great ideas, but will probably happen is that these companies will simnply stop selling indivdual policies. Then what?

  10. You can pas legislation banning rescissions, limiting premiums and banning pre-existing conditions. These are all great ideas, but will probably happen is that these companies will simnply stop selling indivdual policies. Then what?

  11. You can pas legislation banning rescissions, limiting premiums and banning pre-existing conditions. These are all great ideas, but will probably happen is that these companies will simnply stop selling indivdual policies. Then what?

  12. You can pas legislation banning rescissions, limiting premiums and banning pre-existing conditions. These are all great ideas, but will probably happen is that these companies will simnply stop selling indivdual policies. Then what?

  13. You know, it has been rather fun scrolling down this blog and reading some of the postings these past few weeks. And, how ironic I am listening to the song by Bruce Hornsby as I type, as the song “That’s just the Way it Is” is playing. Yeah, but just don’t you believe them! Some things will never change. Yeah, if you let the powers that are stay in place.
    Hello colleagues who are physicians! Why do you put up with these insurance companies who’s only agenda is to their stockholders, board members, and CEOs? Have you forgotten we took an oath to serve the public, not as a vow of poverty, nor as mindless minions who serve politicians or clueless patients attentive to other greedy and self serving sources. Some people mock the Hippocratic Oath, but at the end of the day, it has its place to those who really remember why they decided to become doctors.
    Just remember one thing, colleagues. Every one thinks they are a f—ing doctor, until the crap hits the fan, and then watch the charlatans run for the exits and leave us and the patients to handle the consequences. That is what we committed to when we agreed to accept this training. And that is what makes us professionals.
    I, for one, am glad I accepted this choice, because I care. Ask the charlatan what that means. Watch the look of absolute cluelessness blossom from the face.
    If you want health care reform, let’s take it away from Washington’s clueless faces. Then, and only then, will the public who cares and respects what we truly do respond to what we say and do.

  14. MG, to some degree you are right: insurers are just passing along the cost of care and taking a small cut. But don’t demagogue this without looking at the numbers. Insurers spend about 83% of their premiums go to pay medical expenses. Expenses follow the 80-20 rule. 80 percent of people in any given year would have been better off without insurance. But you never know when you are going to be one of those in the 20 percent and a chunk of those could never have paid for it themselves.
    You’re also right that the individual market sucks. It is a failed market. The solution is to get everyone to participate and subsidize the poor and reform how providers are paid and lower the unit cost and intensity of discretionary end of life care adjusted for inflation. That’s the sort of nuts and bolts discussion we’ve been having on this blog for years and I won’t rehash my views here.

  15. CT IPA, how does antitrust have anything to do with it? Are you accusing insurers of collusion? CT strikes me as the kind of state that has pretty solid state-level anti-trust laws, so they would likely be in violation of the law if they did.
    As for the larger picture, we all agree that primary care has not been significantly driving up costs over the last 10 years. Here is the misleading statement you made and that I have been reacting to all along: “Most of these insurers are driving physician fees lower or keeping them flat for years, while raising their premiums by double digits (39% for Anthem in CA) year after year.”
    My reaction:
    1. You keep talking about fees rather than total expenses. Insurers have not been driving physician expenses lower or keeping them flat for years. Far from it. Utilization is shifting to more, and more expensive, CPT and DRG codes, imaging services and drugs. Medical cost trend continues to rise, usually a little more quickly on the outpatient facility (hospital) side than the professional (doctor in office setting) or inpatient side. Here is some state-level KFF data on increasing physician costs. CT, it turns out, is definitely on the low end. You seem to be seeing a local phenomenon to some extent. Note that CA is by far the highest of the states compared, so your original juxtaposition of CT pricing pressure with CA premium increases is inapt for that reason. It is also inapt because you are looking at single data points and treating them as representative of the trend. Just give the actual average trend! The data is available. Here is the nearby example of MA laid out nicely, and it shows a 7.5% cost trend, 3/4 of which is driven by hospital outpatient and physician/office expenditures. Granted, MA is unique because of their health reform law, but 7.5% annual increase is only a little higher than other states in recent years. I don’t know what share of the national increase is being driven by physician costs across the nation right now, but if it weren’t so late I would do a few more searches and provide the answer. In short, anecdotes are nice, but not when they obscure the big picture.
    2. You are seem to be suggesting that insurers are profiteering. In your view, they apparently keep physician expenses low but jack up rates, pocketing the difference. There are so many sources to directly refute this I’m surprised as the CEO of an IPA you would believe such a thing. Insurer profit margins have not been increasing in recent years. You can get the same story from dozens of sources: margins have historically been around 3-5%. They took a drop during the managed care boom in the mid 1990s (down to basically zero in 1995-96), and then bounced back in the late 90s and early naughts to higher than average levels (5-7% in 2003) and now have come back down to the historical average range. Health insurance was the 86th most profitable industry in 2008. Hospitals made more profit than insurers did. A similar story can be told for the percent of premium spent on medical costs, which has been holding steady in recent years. (see page 8 of this study).
    3. Finally, it always gets my goat that the people who managed to turn the public against health insurers were physicians, the most well-paid profession(s) in America. More than lawyers, more than anything, really. There is a startling Forbes list of the best-paid professions and 9 out of 10 are medical specialties. The other one? CEO! And CEO wasn’t even ranked number 1. What is worse is that physicians turned the public against insurers (“HMOs”) at a time in the mid-90s when (1) they were actually controlling medical costs for the first time since World War II and (2) due to a hyper-competitive period they had nonexistent profit margins. And what were the insurers tarred as? We all know: greedy profit mongers denying care to turn a buck, probably while chortling. Not that denials don’t occur with insurers thinking about their bottom line. They do, but they are not raking it in like Pharma. Instead, they have lean margins and price the expected utilization into the premium, so to get more lax about approvals would mean raising premiums even more. If you think health care costs are high now, wait until all utilization controls disappear while fee for service remains.

  16. Margalit your ok with a system that requires insurers to cover people for free? The current system requires Anthem to take sick people who never paid them a cent of premium, how do you imagine such a system being sustainable?
    CT why are you giving one healthplan substantially lower contracts then another? Why not drop out of BUCA and only contract with the higher paying small players trying to compete. Your complaint is an example of why Hospitals and Docs are such terrible business men. 10-15 years ago you gave BUCA ridicoulous discounts. The only thing worse was the reimbursements you accepted from Medicare and Medicaid. You made this up on non network indemnity business. When everyone finally joined a PPO you made it up on those in small networks. When insurance premiums where $150 a month you can outsell a 20% reimbursement with better service and more efficient operation. Now that people are using 3K plus per year in healthcare I can’t cover up $600 in excess reimbursments. You have a choice, you can either sign contracts making the small guys competitive buy charing them no more then 105-110% of the big guys or you can see 100% of your business go BUCA.
    MG please explain how using your insurance can lead to it not being there, spread the myth come on.

  17. Profit is King and when you have a captive audience with Limited Choices of Hospitals through Health Insurance Contracts.
    The Patient is nothing more than a Cash Cow for profiteering and exploitation by providers and insurance alike.
    Patient Safety is not a Concern as long as Medical errors and Hospital Acquired Infections continue to pay off as revenue Generating Vehicles.
    The only focus of CEO’s is Investors and profits.The Day that this industry has to pay or not be paid for their mistakes;is the Day that Patient Safety will be seated as the Foundation of all Hospital decisions. Until then;PATIENT BEWARE!!!!!

  18. CT IPA doc, I understand how the private physician market works and I agree with your perspective. Actually, your physicians are in a better position than most. Those in private practice that do not belong to an IPA, or belong to small IPAs, don’t even get to the negotiation table. The same is true for tiny hospitals in areas dominated by big hospital corporations (for or non profit).
    However, I believe what you are experiencing in your negotiations with the insurers is very similar to what insurers are experiencing in negotiations with those large hospital networks. Size does matter.
    The rather rhetorical question is where are most of the health care dollars spent, hospitals and IDNs, or private physicians?

  19. JD, I see the big picture. I am trying to give real world examples of trends. I understand the drivers of healthcare costs. Please don’t tell me that I am making unsupported claims about how health insurance works when I have offered real world, contemporary example of exactly how the process is working in a market where many of the big guys (Aetna, Cigna, Anthem and United) either have their headquarters or very large operations.
    What I am challenging is the notion that physician fees are driving the huge increase. I don’t work for a hospital. I’m the CEO of a big IPA. The cut from the insurer (~12% market share) you question is already under way, as they have stated they will not renew our IPA contract and seek to contract with our docs individually at far lower fees (30% in some cases). This is the “divide and conquer” strategy employed by most large insurers to drive physician fees ever lower. We have offered to keep fees flat for a year and then have resonable increases (2.5%/yr), but that isn’t good enough for them. Another big insurer has just unilaterally imposed the huge reductions (>60% in some caes)on many services and is denying payments for other medically necessary and appropriate services due to their own “payment policies.”
    Physicians are expected to make large investments in healthcare IT (EHRs, etc.) at a time when their reimbursements are being slashed by private and public payers (note the 21.2% fee cut by Medicare to become effective March 1). It is illiogical to expect this investment will happen in such an environment.
    You demonstrate a lack of understanding of how the antitrust laws and policy have served to further empower the big insurers while thwarting legitimate activities by physicians to resist anticompetitive behavior by insurers.

  20. CT IPA doc, you are not seeing the big picture. What you experience is consistent with everything I said being true. Don’t take my word for it. Continue to read this blog and do research on the primary drivers of higher cost care (using sources that are not grinding axes for or against private insurance).
    What you didn’t share in your story, but I suspect is true, is that this particular insurer you mention is in fact paying rates much higher than Anthem and United. It also probably has a relatively small share of your business (and the market generally), which is why it pays so much more in the first place. You didn’t mention if this 9% cut is actually going to take effect, or if it was the first round in a series of negotiations. Are you telling them that you need an increase of 10%? Those kinds of divergent starting places happen in hospital negotiations all the time, and the hospitals win more than they lose these days if they have a large market share. If your IPA is large, you will not end up taking a 9% cut, and even if you did you are aware that it would not imply a 9% cut for your business overall, nor for providers in CT, nor for providers in the US.
    When you want to look at what is happening in the US as a whole, you have to go beyond anecdotes and personal experience and look at the national numbers. There is no substitute for it. Either become a mini-wonk yourself, or stop making unsupported claims about how the health care and health insurance industries work, and what is driving costs nationally. It’s the responsible thing to do.

  21. jd – Yeah I am familiar with your reasoning but tell me this is anything but passing along cost plus grabbing their pound of flesh to a market just because they can? Hell, if you actually really use the insurance you can’t even be sure the coverage will be there. The individual market stinks and has for a while.

  22. *The problem with the Dems is that they are constantly trying to convince Americans who don’t understand how the health insurance system works that Insurance companies premiums are the result of incredible profiteering, when they are actually a result of ever-escalating costs. So this “39%” story is right up their alley.*
    Yes, the immediate cause of premium increases is increases in health care costs. However, the insurance industry, the drug companies, the hospital companies and the doctor’s associations TOGETHER are riding on the lack of cost controls within the medical industry. Yes, costs really are going up but these increases come out of the massive pot of costs. If US costs were in line with the rest of the industrialized world, profits would half what they are – and a lot of unneeded beds, and unneeded equipment would not be earning any profits, rather than having lots of unneeded capacity (and unneeded procedures and…) that everyone pays for.
    Now, the Democrats have shown in practice they are not willing to tackle excess costs, so they are indeed demogoging the issue. The average person indeed simply can’t understand the current system but that shows the degree to which the current system is simply insane and needs to be torn out root and branch, not tweaked for performance. The reforms that no one can understand are part of the problem.
    The recent health insurance “reform” was hardly radical but exactly what the big players were willing to grudgingly negotiate with themselves. Bully for them it failed.
    I’m far left of liberal but Democrats deserve less than nothing for their efforts so far – I’d go to Vegas if wanted gamble TOO.
    *We are in a deflationary environment for most things, but not for medical costs. Hospital and other medical expenses continue to rise at high single digit rates and it remains the only sector of the economy outside of government to be adding jobs. That is worth repeating: health care (not health insurance) added jobs in 2009. Without healthcare, there would have been no job growth during the entire Bush presidency (despite a growing population).*
    Think this two ways. It shows a “healthy” economy if you mean “job growth”. It shows a gradually expiring economy and nation if you mean the production of anything one else in the world *wants*. You’re talking about a more sophisticated version of make-work at this point. At least the bridges that FDR’s WPA make-work programs created could be used afterwards. With “health care” fundamentally government-paid-for already, however “private” it may be labeled, what you’re seeing is akin the end of the Soviet Union – work for the sake of work with nothing resulting.

  23. JD, since you maintain what I said does not bear scrutiny, let me tell you what happened just today as an example. I had two meetings with large healthplans. One said that they needed to reduce the fees paid to the hundreds of docs in my group by over 9%, “to get down to where Anthem and UnitedHealth are.” This afternoon, another large national healthplan shared parts of their “market fee schedule” unilaterally set by this plan, by the way. The plan has unilaterally reduced fees for nuclear cardiology and echos by 50% – 65% from where they were in 2009. They also are unilaterally denying reimbursement of risk reduction counseling (cpt 99401-99404) and cutting assistant surgeon fees by 20%. Maybe “the wonks know this” but I am dealing in the real world with real healthplans cutting physicians’ reimbursement almost daily.

  24. Actually, I’ve been trying to explain to Grandma the importance of guaranteeing the medical needs of the people who can’t get insurance, pointing out, of course, the nobility of mind that attaches to devoting one’s resources to the greater good. She wanted to know why the “gd government” can’t take care of them. I tried to explain to her the necessity of keeping this off the books of the government, but I’m afraid I didn’t do a very good job of it. Not sure I understand it myself, really. Anyway, I told her about how a lot of new people would now be required to buy insurance, and that maybe everything would even out. She said she would go to Vegas, if she wanted to gamble with her savings. She just snorted when I told her it was the insurance companies, not Obama, who had come up with this idea. She then tore into me about why the “gd Democrats” were trying to end her Secure Horizens program. I told her the government needed the money to help he uninsured. She then asked me if anyone had ever told me how much I resembled Bernie Madoff. I was kind of flattered by that. I mean, guy’s pretty spiffy for his age, right? Anyway, I’ll keep working on her. I just hope her mind isn’t going.

  25. MG, read the whole letter. Exactly what “abuse” of the insurance industry is reinforced in that letter? Did you read the part about tens of millions in losses during 2009, and how the risk pool is falling apart?
    We are in a deflationary environment for most things, but not for medical costs. Hospital and other medical expenses continue to rise at high single digit rates and it remains the only sector of the economy outside of government to be adding jobs. That is worth repeating: health care (not health insurance) added jobs in 2009. Without healthcare, there would have been no job growth during the entire Bush presidency (despite a growing population).
    The failure of the insurers is to control medical costs and medical utilization. As I and others have explained, there are many reasons for this and it really all comes down to us: the American people have either not been an ally of reforms or private initiatives that reduce unit cost or utilization, or they have come out in opposition. They like it in the abstract, but when push comes to shove they leave it in the lurch almost every time.

  26. Wellpoint’s response:
    “Brian A. Sassi, president of WellPoint’s consumer business, said in his letter to Ms. Sebelius that the increase only affects the individual market, about 10% of its business in California.”
    Just more fuel for the fire that individual markets are nearly completely dysfunctional in every state prone to the worst abuse by the insurance industry and full of some of the crummiest companies (e.g, Golden Rule) out there. My rate for coverage with Coventry only went up a meager 15% this year.
    Funny about I thought we were in a deflationary environment that has pressured almost every other company to hold customer rates down this year?

  27. Paolo
    Yes, I did like WLPs letter. Predictably, the “response” by Sebelius was full of distortions (take note Inchoate).
    My personal solution would be for individuals turned down by insurers to be able to buy into their States’ high risk pool. Of course the States’ high risk pool would have to have some sort of open enrollment or trigger event(i.e.,COBRA runs out)to keep people from gaming the system.
    The premiums the insureds would pay could be subsidized based on income. Some managed care and disease management, etc. could be applied to try to keep costs in line.
    … and another thing, the Plans in the high risk pool do not have to include everything (yes, including the kitchen sink). This can keep costs down for the taxpayers.
    This would solve the problem of the uninsured who can’t get insurance due to a previous illness or condition (v. those who can not afford even the most modest of premiums).
    I realize this does not insure the young invincibles, the Medicaid-eligible who don’t sign up, or illegal immigrants, but it does provide something.

  28. This is priceless. That beautiful and thoughtful letter is basically suggesting that the Government should be responsible for herding profitable customers into the system AND pay the share of those who cannot afford to buy. I assume that the penalties for the die hard would also go to the insurers to compensate them for loss of market share.
    This in of itself, of course, is not Socialized Medicine. What makes it Socialized Medicine is a Government that in return for corralling customers for the seller, outrageously insists on some form of product/price regulation.
    I have no idea how I missed this very fine point….

  29. “And who,” you ask, “are the gnomes who are bleeding us white with these renegade operations?” As a financial guru with direct access to Yahoo! Finance, perhaps I can shed some light on this scandal. Let’s see here. . . WLP trading today at $59. That gives those who bought 5 years ago a chance to get their money back, and those who bought in 2007 at $80 a chance to cut their losses. Too bad about those who panicked and sold last year at $35.
    Looks like 88% of Wellpoint is owned by “institutional and mutual fund holders.” Surprise, surprise, Vanguard leads the pack with 4 funds. Jack Bogle’s Vanguard, so beloved by geezers and pension fund managers. Shame on you, Grandma! I should have known she had been up to something when she shredded her AARP card and started muttering about “socialized medicine.”

  30. Actuary,
    You seem to like Wellpoint’s letter. Do you also like its proposed solution to the problem (an individual mandate that is stronger than the Senate or House bill)?

  31. Richard, under the proposed reform legislation, any member (healthy or sick) could just leave Wellpoint and join a cheaper and better managed health insurance plan. This would not just provide some basic level of fairness between sick and healthy members, but would also force health insurance plans to compete more and try to reduce costs for all their patients, healthy or sick.
    Under the current system, Wellpoint can be as inefficient as it wants with its sick members. They have nowhere to go. While Wellpoint has an incentive to reduce costs for plans with healthy members (in order to get new customers in them), it has no incentive to reduce costs for old plans with many sick members.

  32. CT IPA doc, what you say doesn’t bear any scrutiny at all. If health insurers keep extracting flat or ever lower fees from docs, but their profit margins remain constant at around 5% and their admin costs are constant or lower as a share of medical costs, then how is it possible that premiums keep going up by 6-7% a year?
    The answer is that it isn’t possible. The problem with that picture is that the first premise is wrong. Health insurers don’t keep giving lower reimbursements for medical care. The only place where this is even close to true is primary care. Specialist care and both inpatient and outpatient facility care have been skyrocketing for decades (also pharma and devices and long term care). For inpatient the main driver is unit cost, and for specialist and outpatient care utilization is the main driver, with unit cost playing a significant role.
    People who don’t know how fee for service medicine works can easily get fooled when physicians talk about their fees staying the same or going down. It is true that often if you look at a procedure that has been around for many years using the same technology or technique, the price hasn’t gone up. But, here is what has changed: Physicians are dong less of this procedure, and more of the latest fashionable procedure that gets reimbursed at a 50%, 100%, even 200% higher rate than the old one. They’re also doing more procedures generally. This is one part defensive medicine, one part customer satisfaction, and two parts pursuit of dollars to keep the upper middle class lifestyle that they have come to expect. And by upper middle class I mean in the top 10%, actually more like top 5% except for primary care.
    If insurers were so good at keeping medical costs down as CT IPA doc suggests, we wouldn’t need health care reform, at least not the kind we need now. The wonks know this.

  33. It does appear that Wellpoint’s public relations staff is almost as inept as Toyota’s.

  34. Let’s get real about how healthcare markets work. In almost every state a few big insurers have an oligopsony where they set the contract terms and fees for thousands of disaggregated physicians. In my state (CT) five insurers control 99% of the commercial market for health insurance. Most of these insurers are driving physician fees lower or keeping them flat for years, while raising their premiums by double digits (39% for Anthem in CA) year after year. Docs face substantial antitrust scrutiny when they try to aggregate to fight the big insurers, who have an antitrust exemption (McCarran Fergeson Act)and can divide and conquer the providers at will. Plans talk a good game about quality but all they are really after is ever lower fees. Docs are expected to spend lost of bucks on EHRs, while the benefit mostly goes to the plans. No wonder 80% of docs have yet to purchase EHRs.
    In 2 weeks Medicare will drop fees by 21.2% unless the molasses unfreezes in Congress. Provide ever more care for ever lower fees. No wonder all the baby boomer docs are retiring in droves.

  35. I agree with Wellescent. The current insurance model may protect you against an unforeseen short-term medical expense. However, it does not protect you against being stuck in a prohibitively expensive sick pool when you get a long-term chronic illness.

  36. All of this points to the need to mandate some minimum health insurance coverage for all of the population or offer universal coverage of some form from taxation. Without it, the whole concept of insurance as a means of protecting oneself from unexpected costs goes out the window. The result is that in hard times like these, those who are already sick and cannot opt out of insurance are caught with unexpected cost increases when they are at their most vulnerable.

  37. inchoate- don’t put words in my mouth — I obviously didn’t say what you are trying to imply I said.
    The problem with the Dems is that they are constantly trying to convince Americans who don’t understand how the health insurance system works that Insurance companies premiums are the result of incredible profiteering, when they are actually a result of ever-escalating costs. So this “39%” story is right up their alley.
    Interesting Story:
    The biggest rate increases I ever filed were in NJ in the 90s when they wrecked their Individual Health market by going to a guarantee issue & community rated scheme. The only company left standing was Horizon (BCBS of NJ) because they can’t leave.
    Meanwhile, Individual rates in NJ went up about 300% in 2 years, because people could just hop to the carrier with the lowest rate, and all carriers with the lowest rate (my company was the one for about 6 months) lost millions before agressively raising rates.
    Anyway, most people just want lower costs, and the Dems plan would have raised costs for those currently insured.

  38. yea, actuary, you’re probably right – Team Barry is the only political bunch who would employ such a ‘distortion’
    :rollseyes:

  39. Good post. I know everybody loves to beat up on health insurers but why is that politicians seldom bother to shine a light on the prices charged by hospitals and physicians? What goes around comes around.

  40. As an actuary, I am very curious as to the breakdown of this increase. It is hard to imagine a large block of business going up this high. It is probably limited to an old form or two which contains a higher than average number of unhealthy members as the healthier people have moved to newer, less expensive products.
    Wonder if there were any area rating changes which distorted some of the numbers?
    Also,(in most States)at higher ages (55+) rates can go up 5-7% per year due to age (i.e., member turns 58, rates go up). I wonder if that is included in the 39%?
    What is clear is that the underlying costs are the issue, the premiums are the end result.
    … and the BS about how WLP made $2.7 Billion in “just one quarter!!!” is typical Obama distortion.
    The fact is they made $2.2 Billion from selling their PBM, so they made $500 Million from continuing operations in the 4th Quarter, 2009.
    Chump change considering the overall health care spend in the Q4 2009 was about $600 Billion.

Leave a Reply

Your email address will not be published. Required fields are marked *