WellPoint, Anthem Blue Cross rate hikes: Bloodless Economics?

February 16th, 2010. By Hunter West

The mind-boggling increase in healthcare premiums promoted to policyholders of WellPoint Inc. and its subsidiary, Anthem Blue Cross comes down to a central question, according to a story today in the New York Times… 

Is this the bloodless economics of risk, or a corporate culture of greed? 

In Los Angeles Bernhard Punzet opened up his envelope from Anthem Blue Cross and saw that Anthem intended to increase his insurance premiums by 34 percent. His partner’s would rise by 36 percent. 

Joshua Needle, a trial lawyer in Santa Monica, got a similar shock when he saw that Anthem intended to increase his premium by 33 percent.  “I have no problem with profits,” he said in comments published this morning in the New York Times, “but they’re maximizing profits without any concern that they have a captive audience.” 

He is not alone. About 700,000 Anthem Blue Cross clients are reeling with the news that they may be facing increases averaging 25 percent. That’s the average. A full 25 percent of policyholders are facing premium increases of anywhere from 35 to 39 percent. 

That’s four times the rate of medical inflation. 

Needless to say, consumers are screaming bloody murder, while advocates of public healthcare are using the issue as fodder for a renewed push behind President Obama’s universal health care reform. 

The increase has been delayed by two months, at the request of the insurance commissioner in California, in order to buy the time needed to verify if the increases comply with loss-ratio regulations. 

State regulations require that Anthem spend 70 percent of its premium revenues on claims. 

The WellPoint/Anthem issue is certain to polarize opinion on the whole universal health care debate. Critics of Obama’s initiative decry the smack of socialism his plan suggests. Business advocates hate it, and purists of the American way of freedom and opportunity lament the loss of any ability to call the shots as they see fit. 

However, advocates point to the WellPoint/Anthem increase as an example of what is bound to happen if big business continues to control the health care strings. It’s all about profit and loss, folks. 

And just wait until the biggest wave of baby boomers start retiring, begin having health issues and trigger claims against their health insurance. You think premiums are high now? 

Obama knows what’s coming. And while critics of his universal health care initiative rightly worry about the cost to an already over-extended government for more socialized health care, at least Americans would be assured that their health care is partially underwritten by the feds. If there are increases in costs to individuals, those increases are spread out over a much larger population. 

In Canada, the situation is not perfect. The health care environment is troubled, and has changed much since Tommy Douglas first envisioned universal health care (eventually brought in by Lester B. Pearson). There are certain services that individuals still have to pay for. And things such as life and disability insurance are, of course, an individual decision. 

But in Canada if you need an expensive operation, it doesn’t depend on whether or not you have an HMO and what the limits are. You go and get it done. You may have to deal with longer wait times, but there is no bill at the end of the month. 

All is not rosy with health insurance providers in the US. In a challenging economy where people are losing their jobs, the insurance plan is often one of the first things to go. Pay the mortgage, or the premium? You can’t live without a roof, but maybe you won’t get sick… 

The New York Times refers to a study released this week that the five largest providers of health insurance coverage lost 2.7 million customers in 2009. WellPoint lost 1.4 million alone. 

And yet WellPoint reported record profits of $12.2 billion. 

That said, it should be noted that WellPoint’s fourth-quarter surge came from the one-time sale of a business unit. And Anthem is reported to have lost money on the individual market in California last year. Such losses, “highlights why we need sustainable health care reform to manage the steadily rising costs of hospitals, drugs and doctors,” Anthem, which is based in Los Angeles, said in a statement. 

However, Health and Human Services Secretary Kathleen Sebelius was not satisfied by a five-page response provided by the insurer aimed at justifying the increase.

On her White House blog, she wrote: “Too many Americans are at the whim of private, for-profit insurance companies who are raking in billions in profits each year.” 

One thing is for sure. An increase that for some amounts to 15 times the rate of inflation will surely add much fuel to the fire under the universal health care debate. The latter has been sputtering of late. 

No more. Already faced with leaner paychecks (if they’re working at all), Americans are looking at such astonishing increases and seeing red.

Tags: Anthem Blue Cross, health insurance, WellPoint

This was posted on Tuesday, February 16th, 2010 at 2:52 pm and is filed under Drugs/Medical, Emerging Issues, Insurance . Feel free to respond, or trackback. Read our comments policy.