Anthem Blue Cross jacks up rates while Dems dicker over healthcare reform

When you hear cable news people talking about why the Democrats ought to pass health care reform -- and fast -- it's generally all about political calculations. The president, they say, will suffer the same fate as Bill Clinton in 1994 if he doesn't pass health care. The congressional election will be a bloodbath for Democrats, they say. Republicans will crow about President Obama's "Waterloo" and proclaim it the end of his presidency, they say. And then they quickly move on to a very serious investigation of the John Edwards sex tape.

To whatever extent that can be considered journalism, God's speed, cable news people. The real world implications of not passing health care reform, however, are considerably more hazardous.

For example. While the Democrats have been organizing pity parties and complaining how their 59-seat supermajority just isn't super enough due to the Massachusetts special election results, real people with real lives are continuing to be screwed by their health insurance companies.

Case in point. As if California wasn't in bad enough shape -- de-evolving back to its early 19th Century territory status, complete with celebrities like Nicolas Cage panning for gold near his van down by the river -- WellPoint, the nation's largest health insurer, and its newly acquired subsidiary Anthem Blue Cross has announced that it intends to raise insurance premiums by up to 39% on everyone who buys insurance outside of the workplace. Some 700,000 Californians, with an average rate increase of 25%.

These 700,000 customers are exactly the people who would be helped by the heretofore-stalled health care legislation in Congress. The Senate bill, for example, establishes "health exchanges," which is essentially a health insurance shopping mall for people buying coverage as individuals. The idea, in brief, is to encourage choice and competition, with insurers competing against each other for the largest share of the individual pool, and so premiums are kept low, as opposed to the state-by-state insurance monopolies we see today.

Additionally, under the bill, high-risk individuals would get immediate low cost coverage regardless of pre-existing conditions, age or gender. A safety net.

Meanwhile, for families earning less than around $80,000 a year, government subsidies would be available to reduce the cost of insurance. A family of four earning around $54,000 would see their premiums and out of pocket expenses reduced from around $19,000 annually to just $9,000 annually (check out this subsidy calculator courtesy of the Kaiser Family Foundation). That's significant: $10,000 in annual savings is the equivalent of more than a semester of tuition (plus room and board) at a state university.

But despite the president's televised health care summit on Thursday, there's more than a little bit of vagueness and hesitation to "pass the damn bill," as the saying goes. And whether or not you endorse the reform bill itself, you have to agree that something needs to be done immediately to prevent further gouging and abuse.

That brings us back around to WellPoint.

Rewind to October when Anthem Blue Cross tried to increase premiums for customers in Maine by an average of 18.5%. That's on top of an already ludicrously expensive package: an individual customer in Maine pays around $13,000 in premiums and out of pocket expenses before Anthem coverage actually kicks in. And despite the premium increase, customers wouldn't receive any additional benefits, according to Maine's attorney general. Why so expensive? Anthem raised rates in 2008 by 32%.

Why are they doing this -- I mean, besides the obvious profit motive? Anthem Blue Cross said that over the last five years, it's lost $3.7 million on individual policies. Oddly enough, its highest paid executives in Maine took home a total of $4.3 million per year in salary and bonuses. WellPoint's CEO takes home $9 million annually, and the company reported a $4.75 billion profit -- in the fourth quarter of 2009 alone! This is hardly a company that's hurting financially.

So Maine blocked the rate increase. And how did Anthem respond? They sued Maine.

Now they're trying to pull the same stunt in California -- shy of the lawsuit at this point.

In its defense, Anthem has agreed to move the increase back from March 1 to May 1. Good of them. But it's hardly a consolation for people who are about to see their monthly premium jump by 25% in May rather than in March. An extra two months to scramble for the extra cash.

Executives from Anthem in California are excusing their punitive rate hike by suggesting that only a quarter of its customers will get the whopper 39% increase. That's still 175,000 customers who will be forced to either slip deeper into debt or drop their insurance entirely. And if any of those customers have pre-existing conditions, they won't soon find a replacement plan.

Anthem is also suggesting that rising costs from health care providers -- doctors, hospitals and so forth -- have forced them into a corner with no choice but to hike premiums. However, California's Insurance Commissioner Steve Poizner noted that cost inflation, the rate that costs go up in that state, is only around 10% to 15% annually. Knowing this, how can Anthem possibly justify increasing rates by upward of 39%? How can they get away with it?

They can because, well, they can.

"This increase can't be justified by either underwriting logic or economic conditions," Richard Eskow, a health care consultant and Senior Fellow with the Campaign for America's Future, told me. "And the timing couldn't have been worse. Apparently greed is still a pre-existing condition in some quarters."

Poizner has threatened to strip Anthem of its license to sell insurance in California. That's all fine and dandy on the surface, but it can't possibly carry any weight since the state would, in effect, be taking away insurance for 700,000 Californians. I can't imagine Anthem responding to such a threat with anything but laughter.

For me, this hits close to home. In 2005, my health insurance company hiked my small business premium by 30%. I had no choice but to drop the policy or to close up shop. Since then, I've been without insurance because of a pre-existing back injury that occurred in the interim. I'm clearly not alone. This appears to be happening with increased frequency, and only tragedy follows in its wake.

Even with all of its flaws, the health care reform bill will at least ameliorate this aspect of the crisis. It will, at the very minimum, give us a place to turn for more affordable coverage.

So we really have to ask the congressional Democrats: 'What the heck are you waiting for?"
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