The Wall Street Journal
July 1, 2010
WellPoint Scales Back Rate Increases Sought in California
By Avery Johnson
Health insurer WellPoint Inc. is backing off its plan to increase prices by as much as 39% for individuals in California, instead seeking rates for this year that it said would result in a $100 million loss for the company there.
On Wednesday, WellPoint's Anthem Blue Cross unit told the California Insurance Department that it wants to increase prices for individual policyholders by an average of 14%, down from the 25% average it had previously sought.
"The actual rates we would need are higher than this, but we made a business decision to get a rate implemented," said Brian Sassi, WellPoint's president and chief executive of its consumer business unit.
Wellpoint had been hammered for months by the Obama administration and consumer advocates over the size of its initial rate proposal. Angela Braly, its chief executive, and other insurance executives contend that the rising cost of care and demands for higher reimbursement from providers are driving premiums—and that the federal health-overhaul law didn't do enough to control costs.
WellPoint plans to file 2011 rates in California that do cover costs, they said.
Len Nichols, a health economist at George Mason University, said that WellPoint has "been asserting the point that, 'You've got to understand we can't control costs.' And that point has been made, and the message has been heard."
Comment: After withdrawing a request for an average 25 percent increase in premiums for individual health plans in California, Anthem Blue Cross is now asking for an average 14 percent increase, which they claim will result in a loss that they will make up with 2011 premium increases. With medical inflation, a further increase in adverse selection, and an adjustment to eliminate losses, next year's premium increases will be even more intolerable.
The Obama administration and members of Congress are critical of these increases, blaming Anthem Blue Cross for excessive profits - as if a $100 million loss in this market somehow reflects egregious profits (though, of necessity, they are profitable in other markets).
Obama and Congress are totally off target when they blame the private insurers. The private insurance model does not and cannot work to control costs and insure everyone, no matter how much market advocates wish it could. It is Obama and Congress who bear much of the blame because they were the ones who decided to keep the private insurers in charge.
Although we can blame our elected leaders now, if we don't communicate to them clearly that they must bring us the reform that we need - a single payer national health program - then we will be left with only ourselves to blame.