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Living on a Budget
by Michael Zielenziger, AARP Bulletin, February 19, 2010
Hundreds of thousands of Californians like Mark Weiss, 63, are learning firsthand what a future without comprehensive health care reform might look like.
Weiss, who has been a self-insured Blue Cross member for 30 years, recently received word that health coverage premiums for him and his wife would climb some 35 percent—to $2,278 per month. “I’ve never seen anything like this,” said Weiss, a Los Angeles podiatrist. “It made me sick to my stomach.”
The quandary facing Weiss and other Californians insured by Anthem Blue Cross, the largest for-profit insurer in the state, echoed from the Pacific Ocean to the White House after policyholders received letters last week informing them that their insurance rates would jump as much as 39 percent.
President Obama and Health and Human Services Secretary Kathleen Sebelius warned that the aggressive rate increases illustrated what will happen across America unless Congress passes a health insurance overhaul soon.
Obama: rate increase threat to all
“If we don’t act, this is just a preview of coming attractions,” Obama said after Anthem’s rate hikes, which could affect as many as 800,000 families in California, were first publicized last week. “Premiums will continue to rise for folks with insurance; millions more will lose their coverage altogether; our deficits will continue to grow larger. And we have an obligation—both parties—to tackle this issue in a serious way.”
The warnings from Obama and state officials had an immediate effect.
Bowing to the growing political heat—and demands by federal and state legislators that the company testify in public to justify its rate hikes—Anthem announced Saturday that it would postpone raising rates until May 1.
But the company continued to maintain that its increases were legal, equitable and financially necessary—and analysts said it’s not at all clear that the company can be prevented from eventually boosting insurance premiums.
Americans over 50 at risk
California officials estimated that the average self-insured Anthem customer would be forced to pay an additional 25 percent in monthly premiums. Many customers over the age of 50 say it will be unrealistic, if not impossible, for them to find competing health insurance because of their age and preexisting medical conditions, which make them unattractive risks to other insurers. Some may find it impossible to afford any insurance at all.
Californians are hardly alone. In several other states, self-insured consumers are getting hit with premium increases of 15 percent or more while Congress wavers on whether to change the nation’s health insurance system.
On Thursday, Sebelius issued an HHS report highlighting premium increases across the country, calling them a “wake-up call” for health insurance reform.
“Over the last year, America’s largest insurance companies have requested premium increases of 56 percent in Michigan, 24 percent in Connecticut, 23 percent in Maine, 20 percent in Oregon, and 16 percent in Rhode Island, to name just a few states,” Sebelius said.
At the same time, the HHS report said that profits for the 10 largest insurance companies increased 250 percent between 2000 and 2009, 10 times faster than inflation. It said recent data show that the CEOs of America’s five largest insurers were each compensated up to $24 million in 2008.
In Indiana, the head of Anthem Blue Cross disclosed Wednesday that the average self-insured customer in the state saw his premium bill go up 21 percent this year. Robert Hillman testified at a hearing at the state Capitol after state insurance officials received formal complaints from six Anthem customers whose premiums were hiked as much as 38 percent.
In Indiana, as in California, Anthem argues that it needs to raise rates as health care costs continue to rise. In addition, it says the recession has forced many healthy people to drop their health insurance altogether, leaving the company to insure more of the sick and elderly.
A major goal of the Obama administration’s health care reform initiative is to mandate that all Americans carry health insurance or pay a penalty, so that the burden of caring for the sick can be shouldered by a larger proportion of the healthy.
Anthem: problem is that healthy people don’t enroll
“Our decision to agree to postpone the rate adjustment does not change the underlying issue,” Anthem Blue Cross of California said in its statement. “We are experiencing a higher proportion of healthy individuals choosing not to enroll, leaving an insured pool that utilizes significantly more services.”
The statement also suggested that without aggressive steps to control costs, health care reform won’t solve the financial issues faced by insurers. “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,” it said.
WellPoint, Anthem’s corporate parent, has lobbied actively against health care reform.
Plans passed by both the House and Senate would require everyone to have health insurance in order to increase the ratio of healthy people to unhealthy people among those who are insured. Health insurance marketplaces, known as exchanges, would force insurers to compete for customers with more transparent prices and policies. In addition, insurers would no longer be able to drop customers because of their medical conditions.
California insurance commissioner Steve Poizner, who is also a GOP gubernatorial candidate this year, told reporters in a conference call that his agency had been seeking more information from Anthem since November about the proposed hikes, and wants his auditors to confirm that the new rates comply with a 2006 state law that mandates insurers spend 70 percent of all premium dollars on medical care.
“Medical cost inflation in California is in the 10 to 15 percent range, so I have a healthy skepticism how they can get to 39 percent” and comply with the law, Poizner said. If the auditors find that the rate hikes exceed what is permissible, Poizner can demand that Anthem reduce rates or take away its license to do business in the state.
If you would like to discuss health care reform in AARP’s Online Community, please join the group Health Action Now Mythbusters.
Michael Zielenziger writes about business and the economy. He lives in the San Francisco Bay area.
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