As we followed on Twitter today, Anthem Blue Cross agreed to delay their controversial and large rate increases in the California individual market for two months, from March 1st to May 1, 2010.
This was in response to California Insurance Commissioner Steve Poizner, who asked for the delay to allow time for an outside actuary to review Anthem Blue Cross’ rates.
Anthem remains defiant and unapologetic about the rate increase, and says the rates will ultimately be approved.
They may be right. As pointed out in Marc Lifsher in the Los Angeles Times, the only real authority the Commissioner has is on an related issue, which is whether Anthem Blue Cross was abiding by a 70% “medical loss ratio” requirement–whether 70% of premium dollars were going to patient care, rather than administration and profit. (That requirement was increased from 50% to 70% by former Insurance Commissioner John Garamendi in his last year before becoming Lt. Governor. Federal health reform would increase that requirement to around 85%.)
If nothing else, the delay provides two months of rate relief for many California consumers. Hopefully, the inquiry and attention will provide more information about how Wellpoint and Anthem Blue Cross determines their rates. As the blogger Karoli has noted, increases by Anthem Blue Cross at this level are not uncommon–what is new is that the rates are spotlighting the need for reform, showing their need to be stronger oversight on insurers at exactly the time we are debating what rules they should be under.
But even today’s events just reinforce the need for health reform–both the federal health reform bills, and state legislation to put in place more insurance oversight and rate review. Anthem Blue Cross’ behavior continues to be the clearest case for why such reforms are needed (more is available at http://www.sickofbluecross.com/).
Here’s the statement from Anthem Blue Cross executive Brian A. Sassi:
“Earlier today, Anthem Blue Cross agreed to a request by the California Department of Insurance to postpone a rate adjustment for individual members in California by two months to allow the Department additional time for review. To avoid confusion for our members, this delay will impact all Anthem individual members regulated at either the state Department of Insurance or the Department of Managed Health Care. We welcome the regulatory review and are confident that our rates reflect anticipated medical costs.
“Anthem filed these rates with the appropriate regulators in November of 2009. They are actuarially sound and in full compliance with all requirements in the law. The rate adjustments have been reviewed by an independent expert.
“Our decision to agree to postpone the rate adjustment does not change the underlying issue. All health plans are in the same situation in trying to deal with the steadily increasing medical costs in the delivery system, which are not sustainable. We are also experiencing a higher proportion of healthy individuals choosing not to enroll, leaving an insured pool that utilizes significantly more services. We need to refocus the health care reform debate toward steps that will improve quality and control the underlying medical costs, which is driving the high cost of coverage.
“We understand the impact any rate adjustment has on our members and their ability to continue to carry health insurance. And we are committed to driving quality and reducing costs in the health care system and improving the lives of the Californians we serve and the health of communities all across the state. Members will be receiving a letter shortly that describes these changes in detail and whom to contact for additional information.”
Anthem makes the point that this is a “re-review” of rates filed in November 2009. But that only points out that we need more aggressive rate review to start with, like the legislation that Assemblyman Dave Jones and others have advanced in the legislature in recent years.
Anthem also continues to make the two-point justification of their rates, that it reflects medical costs the impacts from the economy. It’s not clear that’s the whole story. Medical inflation has only been around 9% this year, nowhere near there 25-39% increases.
And while it may be true that people are dropping coverage, leaving a smaller–and typically sicker–pool to cover, that’s something that would be addressed by health reform. After all, health reform would provide subsidies so premiums would not go above a percentage of a family’s income; so if you lost a job or income, you wouldn’t lose coverage. That not only helps the family, but prevents the adverse selection that leads to higher premiums.
Even if the rate increase is ultimately approved, the next two months can be useful in getting a better and deeper understanding of the issues involved, and what new rules need to be put in place, especially in the individual insurance market.