Marketplace Scratch Pad

A gift horse for health reform?

Scott Jagow Feb 9, 2010

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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