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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.

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Najet
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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

cj
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cj

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… Read more »

sam kohen
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sam kohen

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?

sam kohen
Guest
sam kohen

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?

sam kohen
Guest
sam kohen

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?

sam kohen
Guest
sam kohen

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?

sam kohen
Guest
sam kohen

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?

sam kohen
Guest
sam kohen

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?

sam kohen
Guest
sam kohen

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?

sam kohen
Guest
sam kohen

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?

sam kohen
Guest
sam kohen

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?

sam kohen
Guest
sam kohen

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?

ExhaustedMD
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ExhaustedMD

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… Read more »

Steve Parker
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I visit some sites & I found free EMR services that facilitate every one.

Jd
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Jd

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… Read more »