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.
