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A gift horse for health reform?

Just when you thought health care reform was dead in Congress, along comes Anthem Blue Cross. The insurance company and its parent, Wellpoint, are planning to raise rates as much as 39% for California customers.

California's Department of Insurance has asked Anthem to delay its rate increases to give the state time to investigate. By California law, insurance companies must spend at least 70 cents of each premium dollar on benefits. More from the San Francisco Chronicle:

Health insurers in California can raise rates for policyholders as much as they want and whenever they want. State regulators can oversee the increases to make sure they are handled correctly under the law, but have no power to control the rates.

The Obama administration is seizing on Anthem's rate increase to once again drive home the need for health care reform. US Department of Health and Human Services (HHS) Secretary Kathleen Sebelius said this:

"These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy," Sebelius wrote, adding that WellPoint earned $2.7 billion in the last quarter of 2009 alone.

From Insurance and Financial Advisor:

The Anthem request - regardless of whether it is warranted - will do for health care reform what AIG has started with financial services reform. The timing of the request couldn't be worst, unless Anthem and Wellpoint truly want health insurance reform. Why else would they announce the huge hike - there's no other way to put it - as President Obama gets ready to meet with Republicans and Democrats to eek out what little remains possible of comprehensive health care reform.

But here's Anthem's explanation:

Anthem, for its part, said higher medical costs as well as a smaller pool of members to absorb the risk made raising rates necessary.

"Unfortunately, in the weak economy many people who do not have health conditions are forgoing buying insurance," the company wrote in a statement Monday responding to Sebelius' letter. "This leaves fewer people, often with significantly greater medical needs, in the insured pool. We regret the impact this has on our members."

Think this'll be the final straw?

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A negative spiral...
1) Health care is expensive
2) Therefore people drop coverage when times are tough (like now) as long as they are healthy
3) Health care becomes more expensive because when less people pay in the insurance companies have to raise rates in order to pay for care for the remaining sick people on the rolls

Go to 1

At least Sebelius is as slimy as she was when she was a governor evading her own taxes. $2.2 billion of that $2.7 billion profit was from the sale of a business unit.

I would like to see someone calculate what these same benefits would cost (full cost) for someone on the public option. It should be possible to extrapolate a good estimate from Medicare costs.

"Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by compulsion--when you see that in order to produce, you need to obtain permission from men who produce nothing--when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed."
-Ayn Rand
Seems like this isn't supply and demand. Seems like people in the background are working the public over.

So Anthem's explanation gives the rationale for why health insurance coverage needs to be mandatory, or why there needs to be an affordable public option, or both.

If medical insurance companies operated in anything like a free market they would be forced to lower rates in an otherwise debt deflating economy. But the forces of supply and demand affect their rates as much as they did for Enron’s prices.

If “Health insurers in California can raise rates for policyholders as much as they want and whenever they want” then the quick solution would be to change the law. Forcing them to operate as non-profit would go a long way to plugging a huge drain on the economy. Medical insurance companies account for 29 percent of aggregate of America’s health care costs. That much overhead is a high price to pay to keep this segment of the free market delusion on the rails.

States’ insurance commissions and attorneys general need to act in unison just as they did with big tobacco. Waiting for Obama and congress is waiting for Godot.

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