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Feb 12
2010

A daring rate increase by a big insurance company

Posted by kcates in WellPointObamakcatesKathleen Sebeliushealth insurancecompliance

kcates

 

In the you've-gotta-be-kidding-me category of recent news comes word that WellPoint, the big California health-insurance company, wants to increase rates by 39 percent.

To be fair, the company pointed out in a letter on Thursday to Health and Human Services Secretary Kathleen Sebelius, the increase only affects customers who aren't members of group plans and have to buy their own insurance. Still, that's 800,000 people. To be fair again, the company says only some of those people will see the full 39 percent increase. Still - again - most will have their premiums go up by 24 percent just a few weeks from now, on March 1.

If a powerful insurance company is willing in the midst of the Great Recession to jack up prices to that extent on individuals, it makes you wonder if a similar increase on company-sponsored group plans is far behind.

It seems a particularly audacious move because WellPoint, a publicly traded corporation, isn't exactly struggling. Its rate-hike announcement comes on the heels of an earnings report that shows WellPoint - which covers more people than any other insurer in the U.S. - recorded a profit-per-share in 2009 of $9.88, which is pretty darn good for a $60 stock. The company asserts that the increase aims to cover shortfalls in only one narrow and recently money-losing segment of its business, an approach that strikes me as out of whack for an industry predicated on distributing risk and spreading around costs.

WellPoint's letter, in tart response to an angry missive on Monday from Sebelius, fiercely defended the rate increase in spite of the secretary's stern reminder that now might not be the best time to conduct business as usual. "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," she wrote.

WellPoint's response, unfortunately, comes off as a let-them-eat-cake dismissal. It may work - our leaders, so eager to save the banks, seem incapable of instituting meaningful mom-and-pop assistance. But it may also provide a jolt to the dying embers of health care reform. The White House is jumping all over WellPoint, and it's too early just yet to count out an administration that has been in power all of twelve and a half months. Note that the NYTimes this morning has this story: "Poll Finds Edge for Obama Over G.O.P. Among the Public." Obama's popularity isn't what it was but that he still has the backing of half the people, and many if not most of them realize he's struggling with a legacy of economic disaster from the Bush administration. The Democratic Party, although its leaders have not shown the courage their mandate demands, will likely continue to control the government for some time to come because who's carrying the flag for the GOP -- Sarah Palin?

It's news like the WellPoint stuff that adds to the drip, drip, drip of a populist backlash that at times has seemed tantalizing close to advancing the New Deal and requiring corporate interests to share more equitably in America's burdens.

Another drip this morning comes via the WSJ's coverage of the president's annual Economic Report to Congress, which estimates that employers "will add an average of 95,000 jobs a month this year, 190,000 in 2011 and 251,000 in 2012, assuming a jobs package of around $100 billion." (One problem with that assumption is that the jobs package is falling far short of that number).

The WSJ story notes that the best-case scenario is glum indeed: "The unemployment rate would remain at 10 percent in 2010, falling slowly to 8.2 percent in 2012 and not reaching the pre-recession level of 5 percent this decade."

To help put that in persepective, that's when today's middle-schoolers will be college graduates.

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