Pointed Questions for WellPoint

On February 24th WellPoint CEO Angela Brady will appear before the House Energy & Commerce Committee. She will attempt to explain why the company’s California operating unit, Anthem Blue Cross of California, recently sought to raise rates on some individual policy holders upward of 39 percent. While the effective date of the rate increase was postponed, the hearing is not. And that it is being held the day before President Barack Obama’s bi-partisan health care reform summit with Congressional leaders is no coincidence. The Administration and others have pointed to the rate increase as one of the reasons comprehensive health care reform – or at least health insurance reform – is needed.

In preparation for the hearing, House & Energy Committee Chair Henry Waxman and Subcommittee on Oversight and Investigations Chair Bart Stupak sent a letter to Ms. Braly asking for background information. The information ranges from the general (“reasons for the premium rate increase”) to the specific (for 2005-2008, “a table listing, as applicable, premium revenue, claims payments, sales expenses, other general or administrative expenses, and profits for all individual health insurance products”) to what some might call a fishing expedition “all internal communications, including e-mail, to or from senior corporate management relating to the company’s decision to increase premium rates in California in the individual health insurance market.”)

The hearing will be closely watched, not only by lawmakers but by WellPoint’s competitors. It could provide an interesting glimpse into the rate making process employed by health insurance carriers. The information will certainly be cited by advocates – and opponents – of requiring carriers to spend a certain percentage of the premiums they take in on medical claims as opposed to administrative expenses and profits.

Ms. Braly’s testimony will also likely highlight the different ways politicians and business people view the same data. What to a member of Congress may look like profiteering could look to an executive like a prudent hedge against unknown risk.

The Associated Press has taken a balanced approach to explaining the issues behind the Anthem Blue Cross of California rate increase. The analysis is worthwhile reading for anyone following this particular controversy. Among its conclusions: rising medical costs are the main driver of rate hikes, not profits; health insurance rate regulations vary considerably from state-to-state; non-profit health plans also have large rate increases; carriers can’t, and probably shouldn’t, subsidize rates for one business line in one state with profits earned by other lines of business, especially in other states; and that there’s a lot of elements taken into consideration by carriers when they set their rates. While there’s little specifics many insurance professionals don’t already know (other than the make-up of WellPoint’s profits), it’s a very useful summary and analysis of the issues.

The timing of Anthem Blue Cross of California’s rate increase is generally perceived as constituting political malpractice. But there may be a silver lining. Ms. Braly has an opportunity to educate lawmakers on how and why carriers charge the health insurance premiums they do. If members of the Energy & Commerce Committee are willing to look beyond the politics of the rate increase, they might gain a better understanding of how health insurance works in this country.

Public and Private Sectors Facing Tough Health Care Decisions

I’ve written numerous times in this blog on what’s needed to achieve meaningful health are reform: increase access to health care coverage; and constrain escalating medical costs. The latter is the most important. If we don’t get control of health care costs we won’t be able to afford to provide access. Not only that, health care costs will vacuum resources away from other important societal needs.

There’s been some success in recent years on increasing access. The State Children Health Insurance Plan has resulted in coverage for millions of children that otherwise would likely to have gone without. Carriers have created innovative products that have proved popular with young people and those seeking catastrophic coverage. (There’s also been numerous disappointments during that time, when opportunities to expand coverage failed).

In fact, a substantial component of the uninsured could obtain coverage today. As Aetna CEO Ron Williams noted at a meeting of the Business Council in Florida last week, 20 percent of the uninsured are eligible for Medicaid and the state children’s health programs, but fail to enroll in those programs. In an article on the conference by Jason Szep of Reuters, Mr. Williams also noted that 10 percent of the nation’s 47 million uninsured are college students and “could be easily and relatively cheaply enrolled for health care insurance.”

At the same conference, Angela Braly, the CEO of WellPoint, called for expansion of programs aimed at children and low-income families. WellPoint estimates this could cut the uninsured by 25 million if all 50 states acted to cover all children and increasing eligibility for Medicaid.

It’s true that too many of those eligible for public programs fail to enroll in them. It’s true that some states have had success in requiring college students to have health care coverage. And it’s true that expanding children and low-income health programs would bring many of today’s uninsured into the system. The problem, however, is that these programs are under tremendous stress. The safety net that has assured health care for all is crumbling.

In Los Angeles, for example, there are plans to shut 11 health clinics to meet the county’s $195-$331 million budget deficit. According to the Los Angeles Times,  a majority of the Board of Supervisors opposes these closures, but simultaneously, health officials are drawing up contingency plans that would shutter all of the county’s health clinics — facilities that provide “more than 160,000 urgent care visits and nearly 180,000 specialty care visits a year, mostly from the uninsured and poor.”

Meanwhile, in Sacramento, doctors providing care to Medicaid patients will see their reimbursement rates cut by 10 percent as the state makes a mid-year adjustment to its hemorrhaging budget. As a result, fewer physicians are likely to accept new Medicaid patients or some may stop seeing program participants altogether.

America’s current health care system is already a mix of private and public health care programs. The private sector is under attack for its rescission practices, among other issues. The public sector is going broke and, even in the best of economies, seems unable to reach out to all those promised care.

What’s needed is a national dialogue about priorities. If Americans are serious about expanding coverage, they’re going to have to find a way to pay for it in good economic times or bad. And that means keeping it affordable. States should not balance their budgets by breaking their promise to those whom they promised coverage.

The private sector is also going to have to clean up its act. Behaving legally is not enough, they have to act right. Carriers need to act in ways that earns the public’s respect by demonstrating an appreciation of the critical role these enterprises play in society — a role that requires them to meet a higher standard than most corporations. Business as usual could mean no business at all.

There’s a strong demand among voters to change the country’s health care system. Given all that’s happening, that’s not surprising. And, given all that’s happening, it’s not going to be easy, either.