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Healthcare reform prelude: double-digit increases in premiums?

February 9, 2010 |  3:07 pm

WellPoint HQ If WellPoint's Anthem BlueCross is trying to make the case for an individual mandate to buy health insurance, it certainly picked a lousy way to go about it.

The insurer plans to raise premiums by up to 39% this year, prompting a flurry of complaints from customers, insurance brokers and regulators. Two top Democrats on the House Energy and Commerce Committee joined the scrum Tuesday, demanding that WellPoint explain all the rate hikes its subsidiaries have imposed since Jan. 1, 2009 -- just before Congress started work on healthcare reform legislation. (Click here to download the committee's letter)

You might think that the recession would hold down healthcare costs -- after all, that's what happened in the first year of the downturn, 2008. No one's going to ignore a broken arm or a child with a high fever, obviously, but people will skip a trip to the doctor for some ailments when times are tough.

But in defense of its proposed premium increases, Anthem pointed to something else ...

... that happens during a downturn:

Unfortunately, in the weak economy many people who do not have health conditions are foregoing buying insurance. This leaves fewer people, often with significantly greater medical needs, in the insured pool.

In other words, when healthy people try to save money by dropping their insurance, the cost of treating everyone else is spread across a smaller customer base. The insurers' trade association, America's Health Insurance Plans, added that small businesses are also dropping coverage or passing on more costs to their employees, prompting more youthful, healthy workers to go uninsured. And when people who have no coverage rack up medical bills they can't afford to pay, those costs get passed on to the people who have insurance.

The solution? According to the statement released by Anthem, it's "sustainable health care reform to manage the steadily rising costs of hospitals, drugs and doctors." That's not an endorsement of the Democrats' comprehensive proposals; no, the company said, Congress needs to "go back to the beginning and get health care reform done right."

WellPoint CEO Angela Braly helpfully laid out several suggestions for how reform could be "done right" in a lengthy interview that the Wall Street Journal published Saturday. Foremost on her list was controlling the rapidly increasing costs imposed by doctors and hospitals, a situation she would address by giving consumers more information about the cost and quality of the care they're seeking. But she also advocated a "meaningful requirement" that everyone carry insurance, and that consumers with expensive ailments or risky profiles be foisted off on public-private insurance pools. Loose translation: send WellPoint more customers who won't cost much to insure, and have the government pick up part of the tab for covering the ones who cost the most.

Somehow, slapping customers with a massive increase in premiums doesn't seem like an effective way to build support for an individual mandate. Nor am I finding it easy to understand how Anthem justified increases of up to 39% when Braly says its customers' healthcare costs went up 8.9% last year. In fact, even 8.9% seems high, given what actuaries at the Department of Health and Human Services reported recently about hospital, physician and prescription drug spending in 2009. Of course, rates are based on projections for the coming year, and AHIP says sharp increases are expected in all sorts of healthcare costs.

Braly's certainly right about the need for lawmakers to add more aggressive cost-control efforts to the healthcare reform bill, as well as the value of giving consumers more information about costs and outcomes. (I would offer just this one quibble: My HMO makes it well-nigh unaffordable for me to use anyone other than my chosen "personal care physician" and the network of specialists and facilities that doctor is associated with. So unless the rules imposed on me change, telling me that there's a better, cheaper hospital in another part of town won't do me or my insurer any good.) I also think an individual mandate has to be part of the comprehensive solution, and that high-risk insurance pools can be a good idea. I'm not sure Braly's formulation, however, is designed to help WellPoint's customers as much as it would help WellPoint.

Photo credit: Darron Cummings / Associated Press

-- Jon Healey

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