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  • A Taste of Health Care Reform

    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.

    Posted in Obamacare [slideshow_deploy]

    9 Responses to A Taste of Health Care Reform

    1. james, new york says:

      They made close to 3 billion last year and lost about 58 million in the post-Cobra market last year. Do you really think that loss percentage (roughly 2.5%) justifies 39% increases? Is that what this country has become, seeking to maximize profits at the expense of the health of its citizens?

      Also, I see no explicit mention of the public option and it is unfounded to assume that people will opt out of insurance in the future especially when a public cheaper option will be available. With a public option, companies will be forced to compete and be more efficient in running their businesses, thereby driving down prices.

    2. Pingback: A Taste of Health Care Reform | The Foundry: Conservative Policy News. - Health Blog

    3. Pingback: A Taste of Health Care Reform | The Foundry: Conservative Policy News. | Health Blog

    4. Barbara F Delo says:

      James is talking about billions of dollars. Just let me point out that Obama is talking about trillions of dollars – while still cutting money from direct care programs. And everybody is now talking about the 'cost' of healthcare.

      The answer I think is to carefully think about our priorities. And I think for the healthcare issue this means good medical care, preventive care yes – but especially good care when we are sick or have a longterm condition.

      That is the BIG Flaw in Obamacare. There are so very many expensive political frills designed to get votes that don't have much to do with saving lives. There is funding for studies, for educating computer tracking experts, for interpreters, for new bureaucracies, for new offices to house the new bureaucracies, for new staff to oversee doctors and nurses, and new regulatory agencies. There are so many 'carrots' for so many voting blocks. And there are limits and restrictions on copays – one of the simplist and safest cost-saving measures.

      Let's start from scratch and get our priorities right.

    5. Ric, Lawton OK says:

      Here is a good link to more detailed info that describes the particulars of this piece of leftist hyperbole – its a straight up failure of government regulation/price control and not the free market as nothing of the kind was allowed to exsist in CA for health insurance!

      http://www.cato-at-liberty.org/2010/02/19/krugman

      Its comical now that the "government option" medical welfare plan is being touted again as "competition" to the private insurance firms….

      The government never has to turn a profit or break even – its taxpayer subsidizes and implicitly backed by limitless tax dollars….

      We can see how the "public option" is working out in education – the virtual government monoply in education costs $11000 per student, gets the worst results in world for an industrial nation, and is run for the benefit of the teachers/adminstrators and NOT STUDENTS. Sure you can choose to use private education as its allowed and its superior and costs much less – but you pay twice. Private education has become the province for the rich.

      Exactly the same thing will happen in HC if the government is allowed to takeover via a govt option or compulsary insurance (a government option subsidized and run via regulation – a stealth govt option/single payer).

      We will have a two-tiered HC system. A vast majority of the population will get inferior care in government funded entities and the wealthy will access a much superior private HC system. So much for being "equal" eh?

    6. Timothy MIles, Saint says:

      I am befuddled why over 500 members of Congress can't come up with a sensible and workable solution to health care reform. After listening to arguments since before Clinton, I have put together a solution that actually provides a free market solution to the problems we see within the health care industry. Some of the solutions have never been mentioned yet are key to improving the industry.

      You can download a pdf copy of my 11 page plan (9 pages of text) on my blog at http://timothymiles.com/2010/02/12/a-common-sense

      Please check it out now! If you like it as much as I do, sign my petition, spread the word and send a copy to your Senator and Representative.

      Thanks

      Timothy Miles

    7. james says:

      Barbara, the fact that it will cost 1 trillion dollars to reform health care has nothing to do with profits of insurance companies, two wholly different issues, apples and oranges. And of course, fixing things costs money. In comparison to many developed nations, we have substandard medical care and legions of uninsured citizens.

      http://www.forbes.com/2009/09/09/america-versus-o

      Its truly embarrassing yet people keep supporting insurance companies on this issue. I guess all the money insurers are spending to defeat reform is working.

      http://thehill.com/business-a-lobbying/77715-heal

      And lastly, I really dont know what flaw you have allegedly pointed out.

      Ric, I read the link you posted and while the author tries to justify Wellpoint's rate hikes, Wellpoint's own response is that they increased it for the reasons that Krugman said. So I really dont understand why you rely on something that disproves your point. See below.

      http://www.google.com/hostednews/ap/article/ALeqM

      Also, the public option would entail a budget so its not limitless. Further, you need compulsory enrollment for two main reasons: one, to prevent the hikes that are occurring in California. Insurance companies make money by collecting money from a wide pool of consumers-sick, healthy and those in between. Not having healthy people in the pool (as Wellpoint admits is happening in California) reduces the companies' income stream and their profits. Who's left? the sick and those in between and all their medical expenses. So with less income stream and continued expenses, they raise premiums. Two, you need compulsory enrollment for the economy's sake. What country has a sick populace or less than healthy citizens and is still a global financial competitor? None. You need healthy people to maintain a healthy economy so the more people are engaged in preventative care the better.

      Also, like Barbara, you cannot seriously compare an education system to a health system. It does not follow that simply because public education is not the best then the same will happen with healthcare. They are two completely different systems with different nuances at different starting points in our history.

      At the end of the day, a company which has a duty to its shareholders to maximize profits has interests that are completely incompatible with spending money for health care coverage. Anyone who has ever been in any type of business knows this – cost cutting increases chance of profits.

      Most developed countries in the world realized this a long time ago. Indeed, other than Mexico and I believe Turkey, we are the only industrialized nation without universal healthcare. Atrocious. its time we catch up before we fall further behind.

    8. Bobbie Jay says:

      Barbara, you are absolutely right. No one is dying in the streets as democrats would have us believe. Health care may be an individual crisis for some that is dragging the country down. Insurance is such a far cry from health care itself, but since there's a dollar amount, the government takes it on. Gain revenue and corrupt another needless government system.

      Some people can only think what they are told instead of seeing beyond, and realize the way it really is.

      If democrats believed in freedom and liberty to the people, there would be no mandates or penalties attached. There would be no conflict of interest. It would be fair and substantiated.The obama plan is not.

      It wouldn't come to hold tax payers accountable to the expenses of others personal choices, such as abortion and pregnancy and personal lifestyles and cultures.

    9. james says:

      You don't need people "dying in the streets" to reform the system. You reform the system to prevent that from happening. Even Republicans acknowledge that the system needs reform.

      If you understand insurance as I previously described earlier, you would also understand that having people insured keeps costs down for all.

      If Republicans believed in democracy and the well-being of their fellow citizens, they would ensure that all of their citizens have access to affordable health care. But insurance companies have Republicans in their pockets, read and research and you'll see how much money they have received from big insurance to fight for anti-reform. Republicans and even conservative Democrats are not on the side of the people, they are on the side of business, profits and greed. Its no wonder why we get little respect around the world.

      Universal health care is what most developed countries do, the fact that the question of universal health care is still even a debate in the year 2010 is tragic and demonstrates the lack of enlightenment in this country.

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