Anthem Blue Cross, the California subsidiary of Wellpoint, one of the nation’s largest health insurers, recently announced steep premium increases for its individual (i.e., not employment-based) insurance customers. The political response to these premium increases – of up to 39% for almost 700,000 customers – was swift and blunt. Health and Human Services (HHS) Secretary Kathleen Sebelius ordered a federal investigation into how Anthem could “justify” the increases, Rep. Henry Waxman (D-CA) scheduled a hearing, MoveOn.org launched a petition drive, and President Obama himself jumped at the opportunity to claim this as justification for the Democrat health reform effort, calling it “a portrait of the future if we don’t do something now.” Today, HHS released a report citing similar premium increases in several other states.
On the contrary – it’s a portrait of the future for the entire United States if either the House or Senate Democrats’ health bill becomes law. The Wall Street Journal points out that while Wellpoint as a whole is profitable, it has been losing money in this particular market, and these steep premium increases are the direct result of California’s state insurance regulations. Regulations require that insurance companies offer individual “conversion policies” to former employees who have exhausted their COBRA continuation coverage rights. This may be a good idea in principle, but California takes it a step further and sets the premiums to be charged for such coverage by statute. And, since those electing to take advantage of this option are disproportionately those with higher than average health care costs (often due to pre-existing conditions), the statutory rates aren’t sufficient to cover the costs of providing care for those patients. To stay in business – and indeed, to meet financial solvency regulations also imposed by the state – insurance companies have to get the money someplace, and the only place left is to increase premiums for customers not covered by the statute. Essentially, several of California’s regulations have combined to, in effect, require these steep premium increases.
California’s regulations are much less extreme versions of the regulations imposed by both the Democrat health care reform bills – the one that passed the House on November 7 and the one that passed the Senate on December 24. The House bill would direct a newly-created bureaucracy to determine what services insurance must cover, and directs that the Commissioner of that bureaucracy “shall deny excessive premiums or premium increases,” without defining “excessive” and in particular, without regard to whether premiums not deemed “excessive” are enough to allow insurers to pay for the required benefits. The Senate bill would also direct bureaucracy to determine what services insurance must cover, but would impose a complicated system of taxes and “medical loss ratio” requirements that could combine to force insurance plans to pay out more in taxes and claims than they take in in premiums.
Both bills would also require insurers to sell health plans to all comers at prices fixed without regard to their health history. Therefore, healthy people would have an incentive to forego insurance and pay the tax penalty – which would be less than the price of the health plan – knowing they could enroll in a health plan whenever they “need” it. The result would be that almost everyone in the insurance pool would have substantial health care needs, spreading the cost of health care over a much smaller insured population. That would produce very steep premium increases nationwide – no doubt much higher than the increases Anthem Blue Cross has been forced to impose in California.
The recent premium increases in California may indeed be it “a portrait of the future”—a scaled-down portrait of the future under Obamacare.