Wellpoint responds to Health and Human Services Secretary Kathleen Sebelius regarding their proposed 39% rate increase in California.
Brian Sassi, the head of WellPoint’s consumer business unit, said in his letter to Sebelius that the weak economy is leading individual insurance buyers who don’t have access to group plans to drop coverage or buy cheaper plans. That reduces the premium revenue available to cover claims from sicker customers who are keeping their coverage.
The result was a 2009 loss for the Anthem Blue Cross unit that sells individual policies to people who don’t get insurance through their employers, he said. Higher rates for this group, which accounts for about 10 percent of Anthem’s eight million customers in California, are needed to cover the shortfall expected from the continuation of that trend, according to the letter.
“When the healthy leave and the sick stay, that is going to dramatically drive up costs,” Sassi said in an interview. He declined to specify the size of the unit’s loss.
Mr. Sassi doesn’t seem to explain why the healthy are leaving. Are only the healthy finding jobs and going back on group plans? Seems like raising rates is only going to increase the trend of the healthy leaving as they can qualify for coverage with other companies.
He goes on to say…
Sassi told Sebelius that insurance costs also continue to rise because medical prices are increasing faster than inflation, and people are using more health care. That use increase is driven by an aging population, new treatments and “more intensive diagnostic testing,” he wrote.
The above reasoning seems believable. I wonder if more extensive diagnostic testing is related to the lack of tort reform?
No doubt this is ammunition for the Obama administration.
