Sebelius, WellPoint Continue Battle Over California Rates

Published 2/12/2010

WellPoint Inc. (NYSE:WLP) says the cost of providing individual health insurance in California is soaring, but a federal regulator says the company should be using its national profits to hold down premium increases.

Anthem Blue Cross of California, a unit of WellPoint, Indianapolis, recently announced that it would be increasing premiums for some California individual health insurance customers by as much as 39%. The increases are set to take effect March 1.

California Insurance Commissioner Steve Poizner asked Anthem to postpone the increase, to give an independent actuary time to verify whether the increase is justified.

Kathleen Sebelius, the U.S. secretary of Health and Human Services and former Kansas insurance commissioner, wrote to ask Anthem Blue Cross executives for an explanation of the increase, and she suggested that the proposed increase shows why the United States health reform.

Now WellPoint and Sebelius have fired off new letters.

Brian Sassi, president of the consumer business unit at WellPoint, writes to Sebelius that WellPoint’s profit margins in California are a little lower the profit margins of competitors in the state.

Anthem earned $12.62 per member per month in 2008, compared with an average of $1.845 per member per month at one nonprofit competitor and $13.22 per member per month at another.

Only about 10% of Anthem’s health insurance customers in California are individual health insurance policyholders, and the proposed 39% increase that is getting most of the media attention affects a relatively small percentage of individual policyholders who insist on sticking with their current policies and will be changing age categories, Sassi writes.

“The rate changes excluding the impact of age-category changes range from a 20.4% decrease to a 34.9% increase,” Sassi writes.

Many individual insurance policyholders can reduce the effects of the proposed premiums increases by changing products, Sassi adds.

WellPoint welcomes the California Department of Insurance review of the rate increases and believes it can show why the increases are actuarially sound and necessary, Sassi writes.

“Rate increases reflect the increasing underlying medical costs in the delivery system, which are unsustainable,” Sassi writes.

Overall health insurance rates are increasing because of factors such as increases in provider prices and the aging of the population, but other factors are accounting for the rapid increases in the California individual health insurance market, Sassi writes.

When the economy is bad, only the sickest individuals choose to keep paying for individual health coverage, and that means the insureds remaining in the pool use more services, Sassi writes.

Meanwhile, Sassi writes, the healthier insureds who are keeping their coverage are migrating toward the cheaper, higher deductible policies, and that makes the risk profile of the insureds who are sticking with the lower-deductible policies look even worse.

“Other individual market health insurers are facing the same dynamics and are being forced to take similar actions,” Sassi warns.

To prevent antiselection in the individual health insurance market, WellPoint believes that Congress must require all Americans to have some kind of health coverage, provide subsidies for people who have serious trouble paying for coverage, and impose significant penalties on individuals who go without coverage, Sassi writes.

Sebelius does not discuss the state of the California insurance health insurance market in her reply, but she notes that WellPoint as a whole reported $2.7 billion in net income for the fourth quarter of 2009.

“It remains difficult to understand how a company that made $2.7 billion in the last quarter of 2009 alone can justify massive increases that will leave consumers with nothing but bad options: pay more for coverage, cut back on benefits or join the ranks of the uninsured,” Sebelius writes. “High health care costs alone cannot account for a premium increase that is 10 times higher than national health spending growth.”

The Anthem decision to raise rates demonstrates the need for reforming the health insurance system, Sebelius writes.

“Reform will end the worst insurance company practices and put doctors and patients — not insurance companies — in charge of medical decisions,” Sebelius writes. “If we fail to implement reform, insurance companies will continue to prosper while families will continue to struggle

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COBRA Extension in the Works

Virtual Water Cooler, February 10, 2010

Bill Kenealy

Another extension to subsidies to the Consolidated Omnibus Budget Reconciliation Act (COBRA) is contained a pending jobs bill.

According to the version of the bill currently circulating around Capitol Hill, the 65% premium subsidy available to employees involuntarily terminated from Sept. 1, 2008 through Feb. 28, 2010, would be extended until May 31, 2010. However, the duration laid off workers are eligible to receive benefits remains at 15 months.

Given the nation’s continuing high unemployment rate another COBRA subsidy extension is likely to receive broad support in Congress, and key lawmakers such as Senate Majority Leader Harry Reid, (D-Nev.) and Finance Committee Chairman Max Baucus (D-Mont.) are said to be backing an extension.

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If Healthcare Dies, Obama’s Modest Budget Plan B

Associated Press –

Feb. 2: Washington – President Barack Obama’s modest health care budget may be a harbinger of what’s ahead if his overhaul plan dies in Congress. The budget released Monday contains lots of respectable ideas to squeeze savings, expand coverage and improve quality, but no ambitious change that launches the nation on a path to health care for all.

“It doesn’t change dramatically the cost trajectory or fill the coverage gap,” said Health and Human Services Secretary Kathleen Sebelius. With costs widely acknowledged to be growing at budget-busting rates, the $915 billion health spending plan for 2011 would hire more fraud detectives to root out waste and outright thievery in Medicare and Medicaid, the two giant insurance programs for seniors and the poor. The budget would increase spending in one major anti-fraud area by 80 percent, part of a strategy the administration estimates could save taxpayers about $10 billion over 10 years.

As unemployment remains high and people continue to lose jobs with health insurance, the budget provides an emergency infusion of $25.5 billion to help state Medicaid programs cope with swelling enrollment in a period of slack revenues. It would also pump another $290 million to community health centers, frontline medical providers for many of the nearly 50 million uninsured.

As for quality improvements, the budget would start a host of experiments on how to improve care for seniors with multiple chronic health problems, who account for a disproportionate share of what Medicare spends annually. It also would provide a funding boost for a new field of research that aims to determine which medical treatments are most effective for the costliest conditions. Speeding the adoption of computerized medical records is another priority. All in all, Sebelius called the budget “a platform” a beginning, not an end.

She said she hopes lawmakers will revive the health care bills sidelined after Democrats lost their 60-seat majority in the Senate, and undisputed control of the congressional agenda. “I think we need both,” she said.

The health care overhaul legislation would provide coverage to more than 30 million now uninsured. It wouldn’t add to the federal deficit, but it would increase health care spending as people used their new coverage. However, in the long run, some of the cost control measures would slow the pace of annual increases, offering the promise of savings.

As a technical matter an asterisk Obama’s budget assumes the health care remake will pass Congress, generating $150 billion in savings over 10 years.

Most of the government’s health care spending in any given year nearly $832 billion of the total for 2011 is on autopilot, allocated to Medicare and Medicaid. Congressional Democrats tapped Medicare to finance much of their proposed overhaul legislation, and the deficit-reduction commission Obama is promising in his budget is sure to see it as a source for revenue.

Beyond the big areas of costs and coverage, Obama’s budget provides targeted increases for research, public health and prevention. The National Institutes of Health would get an additional $1 billion for research into such fields as genetic medicine that could produce breakthrough drugs and treatments.

Administration priorities include cancer and autism research. The Food and Drug Administration’s budget for food safety cut under President George W. Bush gets a 30 percent, $327 million boost.

And revenues from a tobacco tax hike that Obama signed into law last year will be pumped into a campaign to prevent teens from taking up the habit.

Finally, there’s also a $383-million health care hit in the budget. Obama is proposing to eliminate congressional earmarks for building hospitals and other facilities, including $10 million for Alaska and $35 million for Mississippi.

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Poll Shows Growing Fears on Healthcare Overhaul

Associated Press –

Jan. 25: Washington – Fears about President Barack Obama’s health care overhaul increased significantly in December, according to a new poll released as the legislation’s future hangs in doubt. The monthly poll out Monday from the nonpartisan Robert Wood Johnson Foundation measured consumers’ views of how a remake would affect their own finances and access to care, among other things.

It was conducted between Nov. 28 and Dec. 20, in the run-up to the Senate’s Christmas Eve passage of sweeping health care legislation that brought Congress closer than ever before to enacting a comprehensive revamp of the nation’s medical system. That effort was cast into turmoil last week when a GOP victory in Massachusetts’ special Senate election robbed Democrats of their filibuster-proof supermajority.

The survey shows a majority are following the health care debate in Congress and their trepidation is evidently growing as they do.

Nonetheless, people still think that Obama should address the issue as part of dealing with the nation’s economic slump, although the percentage of people who say that it’s very important for Obama to do so has slipped from 56 percent in the survey conducted in September, to 49.5 percent in this month’s report.

Among the poll’s other findings:
– 33 percent of respondents said they believed their access to care would be worse if a health care overhaul occurred, a jump from 25 percent in the poll released last month. Thirteen percent said they thought they would have better access to care in a remade system, about the same as last month.
– 30.5 percent said their personal finances would be worse under a health care overhaul, compared to 24.5 percent last month. Eleven and a half percent said their personal finances would improve, compared to 14 percent last month.
– 35 percent said the country’s access to health care would be worse under a health care overhaul, compared to 30 percent last month. Around 38 percent said it would be better, around the same as last month.
– 42 percent said the country’s finances would suffer under a health care overhaul, compared with 34.6 percent last month. Thirty percent said matters would improve financially, compared to 32 percent last month.

“I don’t know that it’s all that surprising that people are nervous about health care reform,” said Brian Quinn, a researcher at the Robert Wood Johnson Foundation, a philanthropic organization that supports health care reform. “Health care is an incredibly personal issue and clearly there’s a lack of understanding about what health care reform would do.”

The Democratic bills would require all Americans to carry health insurance, with government help to make premiums more affordable. They would ban insurance companies from denying coverage or charging more to people with health problems.
They would set up new insurance markets for those who now have the hardest time finding and keeping coverage — self-employed people and small businesses.

The poll, a monthly status check on views about health care, also found that consumers’ confidence in their health insurance coverage and ability to access care rose slightly in December.

Robert Wood Johnson’s index of consumer health care confidence stood at 99.1 points in December, up from a reading of 96.9 in November. The index uses people’s responses to a series of questions, such as whether they’re worried about affording prescription drugs or going bankrupt from medical bills, to determine an overall confidence score.

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How Would a New Health Insurance Pool Work?

Los Angeles Times –

Jan. 11: I hear the healthcare bill will create an immediate insurance pool for people who can’t get insurance. How will this work and who will be eligible?

Both the House and Senate bills would provide $5 billion to create a temporary insurance pool until an insurance exchange is up and running. Under the House bill, this program would be available to people who have a preexisting condition or have been uninsured for at least six months. Under the Senate bill, individuals would have to meet both requirements to be eligible. The House pool would open immediately and the Senate pool would open within 90 days of the bill’s enactment. Both pools would set limits on the premiums and cost-sharing that individuals would have to pay.

How will an insurance exchange work?

An insurance exchange is a marketplace a website, for example where consumers can choose from a range of plans that meet minimum standards set by the government. The Senate bill proposes to create state-based exchanges, while the House bill would create one national exchange. Consumers who don’t get health insurance through their employer or a government insurance program would be eligible to shop on the exchange for plans. Low- and middle-income people who shop on the exchange would be eligible for government subsidies to help them buy their insurance plan.

What is the difference between a bronze plan and a platinum plan?

Both the House and Senate bills would create categories of benefit packages that could be offered on the exchange. Under the Senate bill, there are four categories: bronze, silver, gold and platinum. Under the House version, there are three categories: basic, enhanced and premium. The bronze and basic plans would offer the lowest premiums and restricted benefits, while the platinum and premium plans would be more expensive but would cover more, as well as offer such extras as dental and vision coverage.

I’m young and rarely go to the doctor. What are my options if I don’t think I need a bronze or basic plan?

The Senate bill creates an additional category called a catastrophic plan, which would be available to people age 30 and younger. The plan would likely have lower monthly costs and would cover up to three visits to a primary-care doctor.

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An Overview of the COBRA Extension

Secova Inc. released the following summary of the new law extending eligibility for the COBRA Premium Subsidy:

1. People who were laid off before December 31, 2009 are eligible for ARRA premium reduction for an additional two months (through February 28, 2010) if they elect COBRA.
2. The COBRA premium subsidy is available for an additional six months for a total of 15 months. Employees and employers should not confuse the COBRA premium subsidy with the length of COBRA coverage itself.
3. Retroactive payments are allowed for reinstatement in some cases. Those who failed to pay their COBRA premiums once their initial subsidy period expired can pay the premiums retroactively to maintain COBRA at subsidized rates for an additional six months (not to exceed 15 months).
4. The new law requires notices to the following people:
(a) People who are eligible for the subsidy extension or have experienced a qualifying event on or after October 31, 2009.
(b) People who are eligible to make premium payments retroactive because they let their COBRA coverage expire once their subsidy period ended.
(c) People who are entitled to a reimbursement or credit because they were eligible for additional assistance, but paid the full amount of the premium coverage.

The extension of the COBRA premium subsidy gives very little time to implement new administrative procedures and meet the new notice requirements. The Departments of Labor, Treasury, and Health and Human Services are continually releasing clarifications

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MetLife Study Reveals Employers of All Sizes Closely Following Health Care Reform While Consumers’ Attention is Split along Generational Lines

NEW YORK–(BUSINESS WIRE)–Health care legislation continues to be a very hot topic among Americans today. According to new research from MetLife, 75% of individuals and 83% of employers report paying close attention to health care legislation developments. Regardless of company size or whether or not they currently offer medical benefits, eight-in-ten employers say they are on top of the legislation. However, interest is very different among generations as 83% of Baby Boomers and 74% of Generation Y individuals say they are closely following reform developments, compared to 63% of Generation X.

“We have seen a great appetite for information on health care reform”

.As for where they obtain information about health care reform legislation, consumers and businesses alike turn to traditional media outlets. More than eight-in-ten (85%) individuals and 56% of employers cite traditional media outlets (TV, radio, newspapers and magazines) as preferred sources. However, more than half (57%) of larger employers (500 or more employees) are also turning to their benefits brokers or consultants for information, more so than to business media (42%), general audience media (37%) or industry publications (32%).

“We have seen a great appetite for information on health care reform,” said Ronald Leopold, MD and vice president, U.S. Business, MetLife. “Our study also reveals a tremendous opportunity for insurance brokers and benefits consultants to help better educate their clients. In turn, well-informed employers will be better positioned to share with their employees the implications of health care reform on their personal situations.”

Current Satisfaction Impacts Attitudes Toward Health Care Reform

Not surprisingly, levels of satisfaction with current medical benefits impact Americans’ attitudes toward health care reform. More than six-in-ten (62%) Americans without any medical insurance feel that health care reform will be “good for America,” contrasted with 42% of those with medical insurance. 65% of Generation Y individuals believe that health care reform will impact them favorably, but only 44% are satisfied with their current medical insurance. On the other hand, while only 34% of Boomers believe that health care reform will have a positive impact on them personally, 63% also say they are satisfied with their current medical coverage.

Attitudes toward health care reform also correspond to health status. According to the MetLife study, 65% of consumers who assess their health as fair or poor say that health care reform will have a positive impact on them and their families, contrasted to 28% for those who say their health is very good or excellent.

Employers’ Next Steps

Three-quarters of employers strongly agree that employees consider health insurance a critical component of a compensation package. Virtually all (96%) also say promoting a culture of health and wellness for employees is important. However, many of today’s employers (41%) aren’t sure what they will do regarding medical benefits should legislation pass. Thirty percent of those that do offer medical coverage expect their health benefits to remain unchanged, while 39% of those employers who do not currently offer medical coverage are not anticipating offering that benefit.

While 36% of employers are unsure about what they will do regarding non-medical benefits like life insurance, disability income protection, and dental benefits should legislation pass, 44% of those that offer these benefits anticipate that they will make no changes to them. Only 5% of employers who offer these benefits say they would consider reducing them.

“Effective communications for diverse audiences is a critical component for the success of health care reform. While there is understandably a reason for a ‘wait and see’ approach by employers as the legislation is debated, communicating to employees that their current benefits are not changing in the short-term can be surprisingly reassuring,” continued Dr. Leopold.

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Individual Premiums to Increase; No Rate Relief for Small Group Under Senate Bill

BestWire Services –

Dec. 1: A new analysis from the Congressional Budget Office demonstrates that most nonelderly people who would be insured under the current U.S. Senate health reform bill would pay about the same or less in premiums by 2016, if government subsidies for lower-income people are factored in.

The vast majority of the insured 70% would still be in large group plans, the report said. Premium changes among that group would range anywhere from zero change to 3% less, according to the findings of the nonpartisan congressional spending experts.

The insurance industry pointed out that the report demonstrates “the current health care reform proposal fails to bend the health care cost curve,” according to a response from America’s Health Insurance Plans. The industry association focused on those with nongroup policies, who would end up paying more in 2016 — “double-digit premium increases for millions of Americans.”

AHIP argued that the bill encourages people to delay purchasing coverage until they are sick, and the organization also said the CBO report ignored regional variations in premiums.

The next largest segment 17% would be the nongroup insured, where more than half would have their insurance costs subsidized by federal government help.

Those receiving subsidies would pay 56% to 59% less than they would if the system continues as it is now. But the remainder amounting to about 7% of the total nonelderly insured, or 13.8 million would pay from 10% to 13% more than they would without the bill.

The last segment is the small group, representing about 13% of the market.

Their premium difference would be close to zero — except for the 12% who would receive subsidies, bringing their costs down by as much as a tenth.

Besides the 7% potentially seeing significant premium increases, the other negatively affected group are those who currently receive higher-cost plans, also known as “Cadillac plans” in the ongoing health care debate in Congress.

Those premium plans held by about one in five people would be subject to a new excise tax to help pay for the overall health reforms. The report surmises that “most people would avoid the cost of the excise tax by enrolling in plans that had lower premiums.” But those plans would come with reduced coverage.

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Healthcare Issues: Mandated Individual Coverage

Nov. 19: A look at key issues in the health care debate:

THE ISSUE: Should every person be required to either have health care insurance or pay a penalty tax?

THE POLITICS: Requiring everyone to buy health insurance can help spread the responsibility for medical costs. With proposed subsidies to help the poor buy in, the so-called “individual mandate” gets Democrats closer to moving millions of uninsured into coverage plans. Insurance companies are largely on board, though they have raised fears that a Senate version of the health bill doesn’t impose stiff enough penalties to ensure that people actually comply.

Insurers say the mandate, covering everyone so they can’t seek insurance just when they are ill, could bring concessions from them on other issues. An example: Acceptance of all, regardless of pre-existing health status.

President Barack Obama did not support an individual mandate in his campaign, but now says his thinking has evolved. Critics on the left say the plan leaves out lower-middle-class people who aren’t poor enough for a subsidy but will struggle to pay for insurance even if some exceptions are granted.

WHAT IT MEANS: Individuals who don’t have health insurance through employers or another group would have to purchase it, either privately or from any public plan Congress creates. Ignoring the mandate would bring a penalty fine. Democrats propose taxpayer-supported subsidies for the lower-income who can’t afford insurance, though concerns have been raised about whether those subsidies are generous enough; if not, some people could find it cheaper to forgo coverage and pay the penalty instead. Proponents of the individual mandate say among the cost problems it would solve is the hospital and taxpayer burden of the uninsured who use emergency rooms as their primary care when they’re sick.

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Healtcare Bills Could Jeopardize States’ Consumer Protection Laws

Los Angeles Times –

Nov. 16: Healthcare overhaul bills working their way through Congress could jeopardize laws in California and other states that require insurers to pay for treatments such as AIDS testing, second surgical opinions and reconstructive surgery for breast cancer patients.

What’s more, the federal legislation could make it virtually impossible for states to enforce other consumer protection laws, such as the right to appeal if an insurer denies coverage for a particular treatment.

Healthcare overhaul bills in both the Senate and the House would open the door to insurers selling policies across state lines — which some lawmakers fear could allow health plans to take advantage of the lenient rules in some jurisdictions while avoiding tougher enforcement regimes in places like California.

“It would be a huge problem for California consumers,” said Rep. Jackie Speier (D-Hillsborough), who helped craft insurance laws when she served in the state Senate. “California is leading the way in terms of consumer protection, and I don’t want to see that lost.”

The proposals are part of the broader federal healthcare legislation that has been passed in the House and is still under consideration by the Senate. Before any of it can become law, both houses would have to agree on final language and President Obama would have to sign it.

Allowing insurers to sell across state lines is a key tenet of the Republican healthcare platform, and Sen. John McCain (R-Ariz.) made it a centerpiece of his presidential campaign. Proponents argue that interstate sales would enable insurers to customize policies to individual customers’ needs, ignoring state benefit mandates they view as overly burdensome.

Democrats, on the other hand, generally oppose interstate sales and have defeated earlier efforts in Congress to allow them. Opponents fear that allowing insurers to sell across state lines would trigger a “race to the bottom,” in which insurers compete to sell bare-bones policies at the lowest price, lacking benefits such as maternity care.

Interstate sales “is insurance code for picking their rules,” said Jerry Flanagan, patient advocate for Santa Monica-based Consumer Watchdog. “The insurance companies will all run to Wyoming to issue policies, and Wyoming laws would rule in California.”

Whereas some insurers want to be able to sell policies across state lines, the Blue Cross Blue Shield Assn. opposes the idea. It argues that such permission would result in inexpensive, watered-down policies.

California Laws:

Currently, most health insurance is subject to the laws of the state where the purchaser lives. Some states, including California, have greater consumer protections than others.

Patients’ rights are among many areas where California has sought to provide protections beyond those of the federal government and other states. In a similar way, the state’s standards for air and water pollution and fair employment and housing exceed federal laws.

California mandates require insurers to cover home healthcare, bone density screening for osteoporosis, in vitro fertilization and mastectomy. Mandates also cover certain providers, such as chiropractors, and conditions, such as autism. If insurers are allowed to sell under the laws of other states, they might be able to offer policies that do not include those benefits.

The American Cancer Society’s Cancer Action Network believes the federal benefits package will end up including many of the cancer screening and prevention services, such as mammograms and tobacco cessation classes, that the group has fought for in the states for years.

“Healthcare reform could apply them nationwide with one fell swoop,” said spokesman Steve Weiss.

But benefit mandates are not the only concern. Some California lawmakers and policy analysts worry the federal legislation would gut a host of other consumer protections.

In California, for instance, insurers must comply with prompt claims payment laws. And if an insurer refuses to pay for a particular treatment, such as chemotherapy or an organ transplant, the consumer has the right to appeal that decision to an independent medical review panel whose decisions are binding.

Consumer advocates and California lawmakers fear that hard-fought insurance gains may be lost.

Rep. John Garamendi (D-Walnut Creek) is a strong proponent of the healthcare overhaul legislation. But the former California insurance commissioner said he sees trouble in the interstate provision. “There is a real potential for problems here for consumers.”

The office of Gov. Arnold Schwarzenegger, a supporter of the Obama health plan, is assessing the details of bills before Congress, spokeswoman Rachel Arrezola said. But, she said, the governor “strongly believes that any healthcare reform proposal should not erode California’s landmark consumer protections.”

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