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Will insurers raise rates before health-care reform?

Katerina asks:

Is there anything in the bill that will put increased pressure on insurers like Anthem to back away from their intended 40-50% increases this year or will exchange oversight over such increases only begin years from now? (In other words, is there going to be so much time before regulation kicks in that insurers will be able to jack up their premiums like the credit card companies jacked up their interest rates?)

There's nothing the bill will do to roll back past rate increases. But a lot of people are concerned that private insurers will jack their rates up in anticipation of the exchanges. This is not a concern I fully understand, to be honest. The virtue of a competitive market -- that is to say, a market in which it's easy for a lot of people to compare products and prices -- is that this sort of behavior is actually very difficult.

For a rate-raising strategy to work for insurers, you'd need pretty impressive collusion. They way a market normally works is that if five of six players are overpricing their product, the sixth player will decide to get a whole mess of new customers by charging less, and then her competitors will be forced to follow suit lest they lose their market position. This is even more true given that the subsidies are tied to the lowest-cost plans in, if I remember, the second-to-best coverage tier. In other words, if two plans are holding their costs down and six plans are pushing their costs up, the structure of the subsidies will make it very hard for people to afford the overpriced plans, which will mean those plans will lose millions of customers.

The fear of deceptive rates comes, I think, from the fact that people really, really hate and mistrust private insurers. And they have good reason for that. But private insurers aren't monsters. They're capitalists. And when the rules and incentives of the market change, so too will their behavior.

Update As Jim notes in comments, insurers are exempt from antitrust law (though probably not for long), so collusion wouldn't be illegal. It would just be difficult to uphold.

That said, economist Austin Frakt notices that there's actually a policy that will directly police rate increases. "The rate reviews that take effect this year (85% and 80% loss ratio minimums in the large and small/individual markets, respectively) would be a means by which to cap rate increases," he e-mails. "Consumers are supposed to get rebates if those minimums are exceeded. Thus, the vast majority of rate increases will have to be justified by actual medical expenses."

That's exactly right, and I should've noticed it. What it means is this: Starting in 2011, insurers will have to spend at least 80% of every premium dollar on medical care. If they don't, they have to rebate the difference to consumers. So a giant rate hike would have to be traceable back to a giant increase in medical receipts. If it's not, all that money would have to be rebated to enrollees, and it wouldn't do insurers any good. In other words, rate hikes between now and 2014 would just mean rebates for the affected consumers.

By Ezra Klein  |  March 22, 2010; 2:29 PM ET
Categories:  Explaining health-care reform  
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Next: Who is left uninsured by the health-care reform bill?

Comments

Ezra: "For a rate-raising strategy to work for insurers, you'd need pretty impressive -- and totally illegal -- collusion. "

The insurance industry is specifically exempt from anti-trust law, and that hasn't been changed in the new law. They can meet at whatever resort is hot for them and do whatever price fixing, market allocation, etc. they'd like. They can even have a monopoly in some state (and several do) and be the only choice today, and the new law can't require that they do biz in some particular state or subdivision. And the new exchanges are state exchanges, so if an insurer doesn't want to participate in the exchange, outsiders can't enter that market without state approval. State regulators are nearly completely captive of their insurance companies, and the revolving door prevails - directly or indirectly (wife is regulator, hubby is insurance CEO).

Posted by: JimPortlandOR | March 22, 2010 2:38 PM | Report abuse

If the insurers start jacking up their rates, I would hope our legislative representatives would take the opportunity to further revisit additional cost control measures. It would also make it hard for the less, ahem, regulatory minded party in our country to gain any traction on this issue.

Posted by: Jaycal | March 22, 2010 2:42 PM | Report abuse

congratulations to dave weigel!
slowly, the washington post will be transformed:-)

anthem-blue cross california has postponed their rate increase until may. i wonder if it is going to go into effect at that time.
time to start worrying all over again:-(

Posted by: jkaren | March 22, 2010 2:42 PM | Report abuse

Jim,
+1.

If now, after HCR passes this thought just dawned on Ezra and his ilk, and he totally missed the significance of a congressional antitrust exemption, the law of unintended consequences spewing forth from this mess of a bill is going to be staggering.

Posted by: philly211 | March 22, 2010 2:43 PM | Report abuse

Ezra- when you require insurance companies to let children stay on their parents insurance until the age of 26 with no other changes don't you think that the insurance companies would have to raise rates because of that?

With rescission eliminated and no individual mandate the insurance companies will have to pay for coverage for more people who lie about preexisting conditions. You don't think that insurance companies will raise their rates because of that?

I don't claim to be an expert on these issues but they just seem like common sense reasons for insurance rates to rise in the short term.

Posted by: spotatl | March 22, 2010 2:47 PM | Report abuse

"For a rate-raising strategy to work for insurers, you'd need pretty impressive -- and totally illegal -- collusion. T"

Not true.

You can also be a monopoly, which many of them are locally, and that position is legally protected by antitrust exemptions.

The market argument won't work unless the antitrust exemption is repealed.

Posted by: pj_camp | March 22, 2010 2:51 PM | Report abuse

Question 1: My daughter is less than 26, but lives in another state. Can we put her on our policy?

Q2: Do we have to tell the insurance Company that she lives in another state?

Q3: If we do tell the insurance company that she resides in another state, would she be covered?

Posted by: tomber99 | March 22, 2010 2:54 PM | Report abuse

If insurance companies start raising rates willy-nilly, wouldn't that just underline the need for a public option?

Unless the insurance companies want to make the argument that the next bit of HCR should just get rid of them and replace them with single payer, I don't think they'll raise rates any more than they think they absolutely have to.

Posted by: Kevin_Willis | March 22, 2010 2:57 PM | Report abuse


"If now, after HCR passes this thought just dawned on Ezra and he totally missed the significance of a congressional antitrust exemption,"


highly unlikely.

Posted by: jkaren | March 22, 2010 2:59 PM | Report abuse

@JimPortlandOR, you're living in fantasy world. Insurers cannot and do not collude on pricing, and repealing the antitrust exclusion would have absolutely no impact (other than a possible negative impact from reducing the bargaining power insurers have with providers) on premiums.

-----"State regulators are nearly completely captive of their insurance companies"

And that is total BS. Most state insurance departments are actually very aggressive in regulating health insurers, I deal with them on a near daily basis. Stop spreading falsehoods about things you know nothing about.

Posted by: ab13 | March 22, 2010 3:01 PM | Report abuse

The problem with your concept of a competitive market is the pre-existing conditions issue. There are a lot of people like me who have insurance from the individual market but are unable to change insurers (or even upgrade to better coverage with the same insurer), because we have minor conditions that are still considered pre-existing and a reason for an insurer to deny a policy. The list of such pre-ex conditions includes things like allergies, use of a prescription drug, many common conditions of people over 40 or 50 such as tendinitis, minor knee problems, etc, etc, etc. (It's not just the big things like cancer, diabetes, etc, it's almost anything. Leaked underwriting documents and lots of real-life stories show this.)

I would LOVE to upgrade to a policy that includes drug coverage, but I don't dare - because if you are ever denied a policy by one insurer, no insurer will touch you. So I just have to wait until the exchanges are set up. But it's still better than waiting until I'm 65 to get Medicare.

Posted by: nancymp | March 22, 2010 3:02 PM | Report abuse

its amazing that your assumption Ezra is that ALL private insurers act the same way. What about non-profits in MA where there's no pre-ex?

Generalizations are 100% wrong.

Why do you also ignore the fact that insurers nationwide in their filing documents show that they already spend 85% of medical care on average.

When insurers "jack up rates" its because costs warrant it.

unfortunately jkaren when we look at Anthem come may we'll see that they lost business in CA and were completely within the law to increase those rates the same as they will be in 2012, 2014, 2016 etc. The exchange won't stop that unless the cost controls actually control costs.


Why do you think insurers stock prices today are not affected much at all from the passage of reform last night? Its because the end result will be not much better not much worse for them.


pj_camp,

don't you think there's a reason Pelosi didn't bother with the end of the anti-trust exemption? Its not because she loves them so much.

Posted by: visionbrkr | March 22, 2010 3:03 PM | Report abuse

it is still hard to believe that we might have some safety nets coming into play!
a new way of thinking for those of us who have been very scared.

Posted by: jkaren | March 22, 2010 3:04 PM | Report abuse

tomber99,

1-you can't add her for 6 months after its enacted.

2-yes you should tell the insurer she's in another state

3-you would have to check with them but you may also need to consider if you plan has a network of doctors in that state. Some do, some don't.

Posted by: visionbrkr | March 22, 2010 3:06 PM | Report abuse

well, i am hopeful.
:-)

Posted by: jkaren | March 22, 2010 3:06 PM | Report abuse

what Jim said.
Plus, the question is about the 4 long years before the exchanges go live, and the pre-exisiting conditions provisions take effect for adults. You talk about the virtues of a competitive market, but we don't have one right now.

Is there any reason, market-based or otherwise, that we should expect the insurance companies NOT to take actions like:

-arbitrarily raising rates 40 or 50% EVERY YEAR for the next 4 years, to establish a much higher baseline before the exchanges kick in;

-raising rates specifically on the sickest customers--as they all do right now--pushing them out at an even faster clip, now that those people will have a new safety net in the form of the national high-risk pool.

Posted by: andrewlong | March 22, 2010 3:10 PM | Report abuse

There is already legislation on the way courtesy of Perriello and Markey, passed in the House, which would remove the antitrust exemptions currently enjoyed by insurers. It's now up to the Senate.

Posted by: Bertilak | March 22, 2010 3:12 PM | Report abuse

@andrewlong "-arbitrarily raising rates 40 or 50% EVERY YEAR for the next 4 years, to establish a much higher baseline before the exchanges kick in"

Well, there is the fact that insurers are already regulated pretty heavily by the state DOI. There is also the fact that none of the past rate increases have been "arbitrary" but are driven by underlying medical costs.

------"-raising rates specifically on the sickest customers--as they all do right now"

No, they don't do that, healthy and sick people get the same rate increases. I don't know why you felt qualified to opine on this when you clearly don't have a clue how the market currently works.

Posted by: ab13 | March 22, 2010 3:13 PM | Report abuse

That's great Ez - I now feel much better about continuing to pay the extra $125/month that Anthem CA raised my CAL COBRA until it runs out and I'm really screwed. Every month when I write the check I'll think of this post and feel better.

Posted by: akmakm | March 22, 2010 3:23 PM | Report abuse

ab13,

why would you expect andrewlong to understand the market when Ezra doesn't even get it.

"They way a market normally works is that if five of six players are overpricing their product, the sixth player will decide to get a whole mess of new customers by charging less, and then her competitors will be forced to follow suit lest they lose their market position."


Ezra,

I think you need to get the KFF CEO (Halverson I believe his name was) back on for a refresher course on how the market works.

Why do you assume their product is over-priced? Because they're making 2-3% profit?

Posted by: visionbrkr | March 22, 2010 3:24 PM | Report abuse

"For a rate-raising strategy to work for insurers, you'd need pretty impressive -- and totally illegal -- collusion."

Huh?

As others pointed out, collusion is not illegal.

But also -- we just saw Anthem dramatically raise rates -- how'd they do that?

Because they are a *regional* monopoly.

So, Ezra, back to the drawing board -- can we get a better answer?

Posted by: ADCWonk | March 22, 2010 3:27 PM | Report abuse

@ab13 You seem to be implying that the states all have the same level of regulation of health insurance. Not the case. For example, New York has "guaranteed issue" - they have to give you a policy regardless of pre-existing conditions. California has no guaranteed issue. There are different rules on % of premiums that have to be spent on health care, different rules on pre-ex condition exclusion periods, and so forth.

Posted by: nancymp | March 22, 2010 3:27 PM | Report abuse

Nancy, I am implying no such thing. What I am implying is that andrew's assertion that insurers could "arbitrarily raise rates 40-50%" is completely untrue. Not only is it untrue, but he implies they are already doing so, which is also false.

And since you mention those, have you looked at individual insurance rates in NY since they went guaranteed issue?

Posted by: ab13 | March 22, 2010 3:37 PM | Report abuse

insurance companies raise premiums based on age, sex, claim history, and other factors. Most of the time that applies to small or large groups, but it can also happen individually. It may be true that insurers rarely specifically target very sick individuals, I'm not sure. But one effect of current practice is that sicker people pay more in premiums, in addition to paying more for procedures, drugs, etc. In addition, insurers "dump" sicker customers even without raising rates: they simply decide they're not going to cover a given illness or condition anymore.

I meant 'arbitrarily" to apply to possible rate increases going forward, not to prior increases.

Posted by: andrewlong | March 22, 2010 3:39 PM | Report abuse

@ADCWonk: "As others pointed out, collusion is not illegal.

But also -- we just saw Anthem dramatically raise rates -- how'd they do that?

Because they are a *regional* monopoly."
-----------------------------

You are wrong, collusion is illegal.

And you are aware that Anthem's increase in CA was actuarially justified right? You are aware that despite their "monopoly" they lost money in CA last year, right?

Please people, I beg of you, stop talking about things you don't know anything about.

Posted by: ab13 | March 22, 2010 3:39 PM | Report abuse

Ezra wrote: So a giant rate hike would have to be traceable back to a giant increase in medical receipts.

----

So, if actual cost of medical care doubled, insurance will be able to raise rates accordingly?

Posted by: lug21 | March 22, 2010 3:41 PM | Report abuse

not untrue ab13, just wrong, it turns out, given Ezra's update. In any case, it was a question, not an assertion.

Posted by: andrewlong | March 22, 2010 3:42 PM | Report abuse

"insurance companies raise premiums based on age, sex, claim history, and other factors."

You are wrong again. Individual insurers do not raise rates based on claim history. It's illegal to do so. Everyone gets the same increase. You clearly don't know what you're talking about, but you're more than willing to make claims that are demonstrably false. Please stop.

"In addition, insurers "dump" sicker customers even without raising rates: they simply decide they're not going to cover a given illness or condition anymore."

This is also untrue. Please stop.

Posted by: ab13 | March 22, 2010 3:43 PM | Report abuse

I think there is something fundamentally wrong with your analysis here. If what you say is true then there would have been no need for this legislation because competition among insurance companies would mean that the current premiums would be optionally priced from a consumer perspective and that the self-correcting markets would have prevented consumers with preexisting conditions from being priced out of the market (assuming that the true costs of insuring such people is really less than the extortionate premiums currently being charged).

Really, if markets are basically self-correcting (as you seem to suggest) what was the point of this bill? Why are regulations and cost controls even included. On the other hand, if the market for health insurance isn’t competitive and you are prepared to acknowledge the significant likelihood of regulatory capture, how can you make cost projections as you have been doing?

Posted by: MitchGuthman | March 22, 2010 3:45 PM | Report abuse

@ab13 Yes, I know what GI has done in NY - this is what happens when you do that without an individual mandate to balance the pool.

Regarding 40-50% increases, that may be a bit of hyperbole (though maybe there are states that have no regulation of premiums, I don't know).

However, the Anthem case here in CA is 25-39%; I don't know if it has been determined yet whether that violates CA's 70% toward claims rule. If the adverse selection problem continues to worsen until the individual mandate kicks it, there may well continue to be premium increases before 2014 that adhere to state laws.

Posted by: nancymp | March 22, 2010 3:45 PM | Report abuse

actually insurance companies check to see your political affilliation and then increase you 20% if you're Republican and 50% if you're Democrat.

If you're a progressive you get 75%.


I figured if we're just making stuff up why not go full bore.


andrewlong,

the point is that if you DON'T know then why are you speaking on the subject except to start a hysterical frenzy?

Just wait until May when Anthem's rate increase is sadly proven justified. Maybe then you all will turn your attention to the real drivers of cost instead of a group who is easy to blame irregardless of facts or figures. Commenters I can't blame but Ezra knows better.

Ezra would also do better to mention that INSURERS ALREADY SPEND TO THE MLR'S in the soon to be law and some already do MORE than that.

Posted by: visionbrkr | March 22, 2010 3:49 PM | Report abuse

--"So, if actual cost of medical care doubled, insurance will be able to raise rates accordingly?"--

Do you know any other way to keep a business solvent?

Of course, if you're looking to Ezra Klein for lessons on basic economics, you've probably got more trouble than you can handle already. Ditto if you expect anything approaching honesty out of him.

Posted by: msoja | March 22, 2010 3:55 PM | Report abuse

nancymp,

if you're in NY then you must know that NY already has MLR's at 75% and also know that the only thing that's going to help NY is the individual mandate and hopefully cost controls that eventually materialize.


Word also was that Anthem's individual market lost money last year. I believe they sent their data to Sebelius and I'm SURE she'd have mentioned by now if the rates weren't justified with her having been an insurance commissioner and all. How she's acted as insurers being the gov'ts "bogeyman" is especially troubling considering she knows better.

Posted by: visionbrkr | March 22, 2010 3:55 PM | Report abuse

And Ezra's update is dishonest as well:

"Consumers are supposed to get rebates if those minimums are exceeded. Thus, the vast majority of rate increases will have to be justified by actual medical expenses."

The increases already are justified by actual medical expenses. No one has yet come forward to challenge this, they just make veiled accusations exactly like Frakt/Klein are doing here.

Posted by: ab13 | March 22, 2010 3:56 PM | Report abuse

nancy, like visionbrkr said, Anthem has already sent their data to Sebelius. She's a former insurance commissioner, and it doesn't take very long to review a rate filing. You can be sure that if the data did not justify the increase we'd already know about it. Anthem gave a similar increase in IN and their DOI has already come out and said they had an independent third party actuary review it and found the rates justified. Sebelius knows this, and Ezra knows this, but they never let it get in the way of an ill-informed anti-insurer screed, because that's what gets people fired up. Apparently iIntellectual honesty is not as important as obtaining your political/career goals.

Posted by: ab13 | March 22, 2010 4:01 PM | Report abuse

ab13:
here's a small story about how some insurers handle premiums
http://www.npr.org/templates/story/story.php?storyId=113865196

and here's one about Wellpoint purging its sickest customers
http://www.rgj.com/apps/pbcs.dll/article?AID=2010100224014

there have been many others in the press over the past few years, and countless personal stories told in the blogosphere about rate increases based on age, and coverages being dropped.

you keep telling me I'm wrong, but you don't back it up with facts. I'm sure I can't convince you. But I myself would be happy to be convinced by you, with links or details based on your own personal knowledge of the industry.

Posted by: andrewlong | March 22, 2010 4:02 PM | Report abuse

I am generally all for health-care reform, but I have to admit that the minimum loss ratio clause gives me a bit of pause. I used to work as a consultant to an insurance company, and I remember two relevant things: first, the loss ratios were generally lower than 80%, but overhead expenses were often enough to push the combined ratio (loss ratio plus expense ratio) above 100%. Granted, this is for a company that offers mainly property and casualty rather than health insurance, so I have to assume that people have looked at the situation and decided that expenses are lower in health insurance than they are in P&C.

Second, I remember that the loss ratio varied a lot from year to year. Given this fact, it seems unfair to choose a one-year horizon over which to give rebates, since it's not like people would have to give the rebates back if the next year's loss ratio was 120%, even though this would result in a two-year loss ratio of 100%. I envision health insurance companies gaming the system in terms of timing in order to avoid getting screwed, which isn't really helpful for anyone.

Posted by: economistsdoitwithmodels | March 22, 2010 4:07 PM | Report abuse

If insurance companies collude on raising premiums, they will face antitrust risks.
The exemption applies only to federal antitrust laws. Almost every state has enacted antitrust laws that prohibit collusion among competitors, and few states exempt insurance companies from these laws. Moreover, state attorneys general have authority to enforce these state antitrust laws, and many AG have been very aggressive in pursuing insurance companies.

Posted by: tfbush | March 22, 2010 4:08 PM | Report abuse

@ab13:Individual insurers do not raise rates based on claim history. It's illegal to do so.

Just because its illegal, doesn't mean insurers don't do it. They just don't get caught often.

"Insurer targeted HIV patients to drop coverage...A computer program and algorithm targeted every policyholder recently diagnosed with HIV for an automatic fraud investigation, as the company searched for any pretext to revoke their policy. As was the case with Mitchell, their insurance policies often were canceled on erroneous information, the flimsiest of evidence, or for no good reason at all, according to the court documents and interviews with state and federal investigators." link http://www.reuters.com/article/idUSTRE62G2DO20100317

I realize that this is dropping people not raising their rates, but the principle is the same.

Posted by: srw3 | March 22, 2010 4:16 PM | Report abuse

andrew, that npr article is about group insurance, we're talking about individual insurance. (And even in group insurance, each person gets the same rates, so it is still untrue that getting sick will increase your rates individually).

And there is nothing in the other one about Wellpoint "purging" customers other than the title.

Try again.

Posted by: ab13 | March 22, 2010 4:17 PM | Report abuse

andrewlong,

thank you for at least keeping an open mind.

See below to the link to Kaiser Family Foundation.

It depends on the market segment you're in but there's links to individual markets and small employer markets there.

That tells you how each state's rates are modeled (as they call it) ie what determines how and when an insurer can adjust rates. Look under definitions down at the bottom of this link.


http://www.statehealthfacts.kff.org/comparetable.jsp?ind=351&cat=7

NY for example is pure community rating so the rates are actually posted online and cannot change for age which means the young/healthy pay for the sick/old. That is IF the young and healthy are insured.

Posted by: visionbrkr | March 22, 2010 4:19 PM | Report abuse

srw3,

yes and that's why recision needs to end and it had better with this legislation. Either way (to my understanding and my state is like this) insurers need to file rates with the state Dept of Insurance and our state of NJ requires it to be approved. We have an MLR at 80% (and costs at 85%) and premiums are still through the roof.

Maybe we'll get to these true drivers of costs (I mean "winners" in the healthcare debate) for some reason docs are left off the "winners" category though.

Go buy stock in AMGEN!
http://www.reuters.com/article/idUSTRE62K1IV20100322

Posted by: visionbrkr | March 22, 2010 4:27 PM | Report abuse

@VB: I have been pilloried for suggesting that those making the most money in the health care system, device and drug manufacturers, doctors, and for profit boutique clinics need to be asked (forced) to give up some of their profits to keep overall health care costs down.

I know, I know, its socialist to pick on specific businesses to lower their costs, all that the market will bear and all that.

That is why we need premium caps. It will force insurers to bargain harder for good deals. If they are the ones directly paying for the services delivered to patients, then they need some motivation to keep costs down. This is another reason single payer is better. It can force providers to take less for their services. Insurers just don't have the motivation to do this because they can raise premiums (and maintain the 80% MLR or whatever), increase their profits (if not the margins) and continue to weed out expensive customers in the individual and small group markets.

The guild like monopoly that doctors exercise over the number and size of medical schools makes them artificially expensive.

Posted by: srw3 | March 22, 2010 4:38 PM | Report abuse

srw3,

yes but if we force insurers to do something they don't have the ability to do then we'll end up with what happens in MEWA's.

See below.

http://www.state.nj.us/dobi/pressreleases/pr090903.htm


MEWA's generally offer lower premiums but if/when premiums are not sufficient to cover claims, claims won't be paid until additional premium is paid.

You see the money doesn't grow on trees. We can force insurers to be more efficient but we can't force them to lose money.

Posted by: visionbrkr | March 22, 2010 4:45 PM | Report abuse

srw3,

its not just that about the docs but look at it this way. Doctors within a network drive employers decision to be with insurer "X" or insurer "Y". When doctors started to realize that power it went to their heads (or their wallets). Employers absolutely choose insurers (if price is constant or even close) based upon what doctors participate within their plan. That's why docs LOVE insurers when they first start out because they help them build up their practice but then when they've developed their practice they cut into the docs bottom line.

Posted by: visionbrkr | March 22, 2010 4:54 PM | Report abuse

srw3: I don't know about tat particular case, but state investigations into rescission have typically found them warranted. Yes, there are a few admittedly bad outlier cases, but the issue is completely overblown. For every case like the one you linked to there are 10 more where a person tried to blatantly defraud an insurer.

Posted by: ab13 | March 22, 2010 4:56 PM | Report abuse

"Starting in 2011, insurers will have to spend at least 80% of every premium dollar on medical care... So a giant rate hike would have to be traceable back to a giant increase in medical receipts."

So that begs the question: What's to prevent providers from jacking their rates in anticipation of upcoming regulation? And those rates being passed on to consumers via insurance providers?

Posted by: jc263field | March 22, 2010 4:59 PM | Report abuse

"Starting in 2011, insurers will have to spend at least 80% of every premium dollar on medical care... So a giant rate hike would have to be traceable back to a giant increase in medical receipts."

jc263field, a better question for Ezra would be: Show me one giant rate hike that was not traceable back to a giant increase in medical receipts.

Posted by: ab13 | March 22, 2010 5:01 PM | Report abuse

@ab13: For every case like the one you linked to there are 10 more where a person tried to blatantly defraud an insurer.

The fortis case wasn't just a rogue employee. Management built and used a computer program to SYSTEMATICALLY look for high cost patients and purge them, policies often were canceled because of "erroneous information, the flimsiest of evidence, or for no good reason at all, according to the court documents and interviews with state and federal investigators."

this is not just 1 isolated incident. This was going on company wide. I have no proof, but it wouldn't surprise me if other companies were doing the same thing and just hiding it better. After all, other insurers have to compete with Fortis so they have to be equally ruthless in getting rid of high cost patients.

Posted by: srw3 | March 22, 2010 5:10 PM | Report abuse

Ezra, thanks so much for responding to my question.

To those who have argued that Anthem's 39% rate increase is fully justified by their costs, well I fear I am not as filled with belief as you are.

In December of 2008, the monthly premium for myself and my two children was $546 with a $1500/person deductible. In January of 2009, our monthly premium was raised to $724/month, a 33% increase.

This was a short period after Anthem bought Blue Cross of California. Up until then, the largest increase in premiums had been about 12%. Included in the letter announcing the rate hike was a flyer explaining how I could switch to a plan with higher deductibles and lower coverage if I wanted to.

In January 2010 I got another letter. This time my rate was going to go up to $914, and this time the urging to switch to another plan was included not in a separate paper but in the same letter announcing the hike.

It was clear that Anthem was trying to muscle me into a poorer plan with a higher deductible. If the rate hike had gone through the beginning of this month as it had been scheduled to, I would have had my rates rise 67% in 14 months. Medical inflation is high, but I really doubt Anthem's medical expenses have gone up 67% in 14 months. However, my two children have mild asthma and this December I had a kidney stone, so Anthem knows I can't exactly shop around for a competitive policy from someone else.

Flawed as it might be, I am very grateful that Congress has finally passed the Health Care Reform bill. I hope that it is an historic start to an ongoing process that will ensure that health care in this country doesn't bankrupt our economy and America's families.

Posted by: katerina1 | March 22, 2010 5:17 PM | Report abuse

@srw3 "Management built and used a computer program to SYSTEMATICALLY look for high cost patients and purge them"

The second part of that is wrong. The computer program doesn't purge anything, it would just identify suspicious cases. And what is wrong with it being "SYSTEMATIC"? The most efficient way to identify possible cases of fraud is to have a computer scan claims data and look for certain types of claims or patterns. Medicare could certainly benefit from a computer program to identify potentially fraudulent claims.

Did some research, and that case is still under appeal. I can't say for sure whether or not the insurer was in the wrong, but I can say that the overwhelming majority of rescissions are for fraudulent behavior, and a couple of cherry-picked stories do nothing to dispute that fact. I've personally witnessed plenty of cases that investigators call "erroneous information, the flimsiest of evidence, or for no good reason at all" that were actually pretty clear-cut cases of an insured withholding relevant information from an insurer.

"this is not just 1 isolated incident. This was going on company wide."

So where are all the other people coming forward with evidence of this? Why haven't they found these thousands of innocent victims of the evil insurer?

I'd be fine placing a lot more restrictions on rescission, but people really need to get some perspective on just how minor an issue it is.

Posted by: ab13 | March 22, 2010 5:49 PM | Report abuse

thanks for the information, visionbrkr.

Posted by: andrewlong | March 22, 2010 6:07 PM | Report abuse

Hey Ezra,

Is there anything besides potential bad customer ratings and market pressure from the insurance companies purposely charging a little extra from everyone, using it collectively as an interest free loan, and then rebating the difference at the end of the year? As excited as we get sometimes about tax returns and such, I can see a culture of excitement about annual insurance rebates too.

Maybe I'm being paranoid, but at least I can be paranoid while celebrating!

Posted by: ZoltanChicago | March 22, 2010 6:47 PM | Report abuse

andrewlong,

no problem. its amazing what's out there that people don't know about.

someone asked last week about rating insurance companies and i linked them to the ncqa website. Its all there. yes it'll be nice and convenient to have them in the exchange but its already out there.

Posted by: visionbrkr | March 22, 2010 8:31 PM | Report abuse

Right, because all the credit card providers couldn't possibly raise their rate, increase their fees, and push out onerous new Ts&Cs before the very minimal credit card reform went into effect March 1st.

sPh

Oops. Ezra, do you have a credit card? Do you read the small print they send you? Did you read the small print they sent you around 01/15/2010?

Posted by: sphealey | March 22, 2010 9:12 PM | Report abuse

(In case you hadn't guessed, ab13's another career beneficiary of the private insurance industry. Don't hurt his feelings too much.)

Posted by: pseudonymousinnc | March 23, 2010 12:21 AM | Report abuse

"The guild like monopoly that doctors exercise over the number and size of medical schools makes them artificially expensive."


How many times do I have to clear up this nonsense. Miami, New York, and Boston have the highest number of doctors per capita in the country. They also have the highest healthcare costs per capita in the country. Flooding a region with doctors makes healthcare costs go UP, not down.

More doctors = more tests, more procedures, more hospitalizations, etc. The only doctors that compete against each other for price are those that are purely free market (i.e. plastic surgery, LASIK, etc). For every other area of healthcare, creating more doctors leads to higher costs, not lower.

As the per-procedure reimbursement amounts have fallen by an estimated 5-10% over the last 15 years, total healthcare costs keep skyrocketing because doctors behave like regular people and increase their volumes to drive up revenues. Thats why every man aged 40 and above in New York gets a cardiac cath even if they have zero symptoms (yes I'm exaggerating but not by much).

We have too many doctors, not too few and we need to stop paying them for each visit/procedure.

Doctors should be salaried employees of the federal government. That way the doc can get his 100k/200k per year or whatever and not have to cram in 70 people into his clinic that day and hire 10 billing people to deal with 50 different insurers.

An ideal primary care practice would have federally salaried doctors working in federal clinics with 10-15 patients per day at most. Doctors will be happier, patients will get better care. Its a win/win/win for everybody.

Posted by: platon201 | March 23, 2010 1:00 AM | Report abuse

What stops them from hiking premiums AFTER health care reform?

Posted by: kingsbridge77 | March 23, 2010 9:45 AM | Report abuse

THEY ALREADY HAVE !!!!!

Posted by: JourneyHomeBurke | March 23, 2010 1:23 PM | Report abuse

Anyone who can't understand that all insurance companies will have to raise their rates because of the mandatory inclusion of preexisting conditions isn't looking at reality. Competition has nothing to do with it. A pool that has much greater risk will result in many more claims. How is that so difficult for you to comprehend Ezra?

Posted by: infuse | March 24, 2010 1:48 AM | Report abuse

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