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February 15, 2010
WellPoint Cites Adverse Selection as Rationale for 39% Rate Hike
The decision by Anthem Blue Cross to raise premiums 39% for some people in California is questionable in light of its fourth quarter earnings of $2.7 billion. The WSJ Blog points out that this dramatic increase comes at a convenient time for Democrats looking to regain a little health-care-overhaul momentum. In light of the huge profits,
... it’s no surprise that HHS Secretary Kathleen Sebelius sent a letter calling on the company to justify the rate increase. After WellPoint, Anthem’s parent company, responded with this letter, Sebelius released a skeptical statement that cited WellPoint’s fourth-quarter earnings of $2.7 billion.
The rate increase applies only to policies for people in the individual market. WellPoint’s letter says that, in the troubled economy, many people are choosing to go without health insurance. And many of those who are keeping their insurance are buying cheaper policies that offer less coverage.
The people who do tend to hold onto good insurance plans are those who need them most — people who are already sick. Of course, when you have healthy people bailing out of insurance plans and sick people hanging on, the average health-care cost per person in the plan is going to go way up — and that’s going to be reflected in rising premiums.
As the WSJ notes this morning, the insurance industry and the Obama administration actually agree on the solution to this problem: Require everyone to buy insurance. For their part, Republicans argue against such a mandate, saying that people should be allowed to choose whether or not to buy health insurance.
February 15, 2010 | Permalink
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