The Wonk Room

Another Case For The Public Option? Insurer Releases Third Report Threatening To Raise Premiums

Wellpoint, the nation’s largest insurer, has issued 14 reports on how health care reform would affect the premiums in 14 states. The insurer claims that the low individual mandate penalties in the Senate Finance bill and narrow age rating bands, will lead to higher premiums for Americans currently purchasing coverage in the individual and small group markets. “[W]ithout a strong individual mandate, the market reforms will have a direct impact on premiums and we believe will exceed any aggregate savings that can potentially be achieved through other elements of proposed legislation,” the report concludes:

Currently, a young and healthy individual may purchase comprehensive health insurance coverage for $107 per month in the individual market, and it is very reasonable that in the absence of a strong individual mandate, other elements of reform cannot overcome the impact of insurance market reforms and will multiply this premium for those purchasing coverage post-reform. We believe the pages that follow reflect a reasonable, honest assessment of the impacts those purchasing coverage would see post-reform. As shown, we do expect some individuals that currently exhibit higher risks to experience a drop in premiums as the result of reform. However, most purchasers will face higher premium costs post-reform, and as shown, purchasers of average age and average health are expected to face higher premiums post-reform.

If policy makers don’t require enough younger and healthier applicants to join the risk pool (and offset the costs of covering sicker applicants), premiums will increase for everyone, Wellpoint says. And it’s a valid point: modified community rating and guarantee issue can only lower costs if the size of the risk pool is expanded and the healthy balance out the costs of the sick. The merged senate bill should certainly adopt stronger mandate measures. But comparing today’s individual market policy with a post-reform product from the exchange (or even in the remaining individual market) is apples to oranges. If properly designed, the post-reform insurance plan will not be the porous, inadequate, high deductible policy currently available in the non-group market. Americans would be purchasing regulated policies from insurers that can’t rescind coverage or deny certain basic benefits. In other words, if you’re paying more, you’re getting a better plan.

The reality is, some reform provisions would tend to make premiums higher than current-law premiums; other provisions would “tend to make them lower.” Americans from different income brackets will pay different amounts for health care, but on the whole an analysis of Congressional Budget Office data suggests that reform will offer health insurance policies that are more affordable than what is currently available in the individual market.

If premiums do increase, however, insurers bear a fair share of the blame. As Families USA points out, insurers are “like a poker player who complains about his hand when, in fact, he is the dealer.” For all their concern about health care costs, Wellpoint has a poor track record of controlling prices or providing adequate coverage. According to a 2008 study by the American Medical Association, “WellPoint controls the largest market share in 9 of 42 states studied (CA, GA, IN, KY, ME, MO, NY, OH, and VA), dominating 71 percent of the market in Maine, 58 percent of the market in Indiana, and over half the market in Georgia, Kentucky, and Virginia.” It is the poster child for why progressives want to force large for-profit conglomerates to compete with a public option that places people before profits.

Wellpoint is heavily invested in the individual health insurance market and “has been among the most aggressive in pursuing healthy customers who are less likely to use benefits to pay for medical care.” The company has a “long history of putting its bottom line ahead of the welfare of its policyholders and their health care providers”:

- WellPoint Inc. has been barred from adding customers to Medicare plans after it denied prescription drugs to the elderly, endangering their lives.

- In 2006, WellPoint’s profits increased 34% as premiums and fees surged.

- WellPoint Inc., the nation’s largest health insurer that covers about 1 in 10 people in the U.S., fared the worst among its peers in a survey gauging how quickly HMOs process and pay claims to doctors.

- In March 2007, the state’s Department of Managed Health Care fined Blue Cross of California and its parent company, WellPoint, $1 million after an investigation revealed that the insurer routinely canceled individual health policies of pregnant women and chronically ill patients.

- California regulators uncovered more than 1,200 violations of the law by the company in regard to unfair rescission and claims processing practices.

- In December 2007, Insurance Commissioner Steve Poizner announced his office was imposing a $12.6 million fine against Blue Shield, saying the company had “committed serious violations that completely undermine the public trust in our healthcare delivery system.

Consider the source, but also understand the criticism. If we want to ensure affordable and comprehensive coverage we have to improve affordability standards (by injecting some real competition into the marketplace) and hold insurers accountable.