WellPoint's Heart-Stopping Rate Increase

Submitted by Wendell Potter on

Cash or Credit onlyA congressional hearing next week into the proposed 39 percent rate increase in California by health insurance giant WellPoint could breathe new life into health care reform efforts on Capitol Hill, especially if lawmakers broaden their investigation into the outrageous rate increases other insurers are also demanding from coast to coast.

WellPoint found itself in Congressional investigators' crosshairs after the California Department of Insurance challenged the company's planned increase in the rates it charges its customers who cannot get coverage through the workplace, but have to go it alone in what is called the individual market.

This week WellPoint announced that it was canceling its Investor Day, which had been scheduled the day before hearing by the House Energy and Commerce subcommittee on oversight and investigations. An Investor Day is a big and usually very expensive affair that publicly-traded companies hold, usually once a year, to tell investors and analysts how much money they expect to make in the coming year, and how they plan to make it. It is not at all unusual for a company to spend a quarter of a million dollars on these soires, which, because the news media usually ignore them, give company executives a chance to speak with more candor than usual about their operations.

I know because I used to help plan these functions. They are often held in New York's finest hotels -- the ones that charge a minimum of $1,000 a night for their rooms.

Keith Olbermann invited me to talk about WellPoint's rate increase on his Countdown show on MSNBC last night. When I got home, I saw that I had received several emails from people who has seen the show and wanted me to know about their own heart-stopping rate increase notices. Two were from former colleagues of mine at CIGNA, both of whom had worked for the company for years and who were enrolled in a pre-retirement plan. One said CIGNA planned to increase his rates by 46 percent this year. Another said his rate increase would be 47 percent. Yet another acquaintance, who works for a small business in Iowa, said he received a notice from his insurer that his rates would be going up by 38 percent.

I pointed out on Countdown that WellPoint's planned increase in Maine was so high the state's insurance commissioner cut the planned increase in half, prompting WellPoint to sue the state. That case is still pending. And I noted that Blue Cross and Blue Shield of Nebraska announced plans last year to increase rates on some of its plans by more than 35 percent. It won't take a lot of investigating for members of Congress to see that these outrageous rate increases are common, and that the WellPoint increase in California is nothing more than business as usual for this industry, which values profits far more than the health and well-being of its customers. If everyone who has received a rate increase notice lets their members of Congress know about it, it just might give lawmakers the motivation they need to get reform passed.

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Mutternich replied on

<blockquote>"Thank you, this back and forth has helped me understand the warped boomer thinking...Like another of your generation, Bernie Madoff..."</blockquote> Actually I'm older, pre-war if you count from 12/7/41, but people have always told me I look younger. :-) <blockquote>I love the fact you respond to my point about doctors not being happy about medicare reimbursement rates by telling me that you pay your doctor an extra fee.</blockquote> My point was that this doc had <i>already</i> bailed from Medicare -- <i>and</i> private health plans! -- so you weren't telling me anything new. As for "extra fee," this was the only way I could find a primary care doc, so too bad if you've got a problem with that. Tell you what: I've got a keratosis near my elbow that I ought to get zapped before it can turn cancerous. It's covered in my primary's annual contract; but hey, that's no fun. Maybe I'll go to my more upscale dermatologist on Medicare; he's got better magazines in his waiting room. I'd have to pay the Medicare deductible, but then you'd get to subsidize the remainder. Sound good? <blockquote>...it does not absolve you from the fact that you currently COULD benefit from the Madoff math of Medicare.</blockquote> Well, pardon me for not croaking and have a really nice day.

Anonymous replied on

Bernie Madoff, born April 29, 1938. You guys are about the same generation so I guess I insulted the boomers. I wonder what type of math and logic were being taught in schools back in the late 50s. Was your profession in drama? You're very good at it? I have no problem with you're dealing with your physicians in fact if you read my previous post closely, I said "THANK YOU" for keeping Medicare costs down. I guess you wanted a pound of flesh with that statement. My two main points 1) the President and Congress should not be adding a new Medicare benefit (closing the donut hole) on top of something that is already about to go bankrupt unless they structure it to be sustainable and paid for (even if it means my taxes go up) which may mean limiting it to an income-based model; and 2) that the unintended consequences of adding a public option is that providers will drop out of the program if fees aren't raised; which means quality will change or overall costs likely will go up, not down. Your last comment was also a little dramatic don't you think? Sounds like you might be skipping some of your anger medicine if this is the best argument you can offer for all of the debt we face. No one's asking you move on. In fact, based on your statements, it seems like you are a net financial plus for the system, so we need you around to offset those draining the coffers. We're not paying for our spending and pretending otherwise will not solve our problems. Good luck with the keratosis.

Mutternich replied on

<blockquote>Good luck with the keratosis.</blockquote> It's absolutely no problem <i>if</i> you can see a doctor. See, here's the sweetest irony of your postmature suggestion that I talk to my doctor about how he likes Medicare: The reason he has time at all to shoot the breeze with me about this stuff is that I the patient am his customer, not some health plan, so there's no health plan bureaucrat to ration his minutes with his patients. He can also promise next-day appointments. Contrast that with most health plan docs -- months for an appointment, then get your butt out again in 10 minutes. <blockquote>Sounds like you might be skipping some of your anger medicine...</blockquote> Do I have your blessing to get it on Part D, for which I "likely never contributed a dime"? Remember, our profit-friendly Congress obligingly ponied up Big Pharma's asking price without even a whimper. Not to mention that getting it prescribed would also cost Medicare. <blockquote>In fact, based on your statements, it seems like you are a net financial plus for the system, so we need you around.</blockquote> So I'm "absolved" after all? Not even five Our Fathers for my penance? Oh, and this just in: https://www.prwatch.org/node/8922 I hope your health plan is cutting you a special deal for doing this; it's sad to think of them gouging such a loyal shlepper just like everyone else.

Anonymous replied on

You are one ornery old coot aren't you? It would be amusing if the country weren't basing policy upon such irrational logic and anecdotes that pass as trends. Between the fiscal conditions, the Republicans alleging death panels and Sebelius killing a non-partisan scientific study because some influential people complained, I'm beginning to believe that we're really in deep trouble. People can't have a reasonable discussion or disagreement without being slotted in the enemy camp. I would be interested in knowing how you made your living prior to living off the dole - I'm not expecting a straight answer on this one, but thought I would ask. Re the anger meds, it was a joke (though you do seem very angry) but if you make over 150% of poverty, pay out of pocket. If you make less, no problem with being on RxD. Re being a net plus contributor currently, it does not absolve you (sorta reminds me of Vichy France). I believe a significant portion of Medicare spending occurs in the last 2 yrs of one's life (and I'm fairly certain 10% occurs in last 2 months) so when its all said and done under the current arrangement you will make out well even if your jackpot turns out to be a ominous benefit. I'm not confident about any numbers now after reading the link you posted. I'm finding it hard to trust anyone's numbers without knowing what they are trying to accomplish. For example, in the press release, the information on profits includes the one-time WP sale we mentioned earlier which inflates profits, but hey why note this it would dilute message. The profits also include self-insured business as well as insured business and there is a big difference (70-85% MLRs on insured vs. 80-100% on the self-insured business depending on how a self-insured company computes the plan). The kff premium data is great as broad survey information but the details vary widely (the kff study states this clearly). Premium changes don't account for benefit changes. Since plans are segmented, it does not account for adverse selection impacts (since some plans for an employer are omitted). It does not account for the fact that more people are moving from group-based plans to individual coverage (which I would imagine has a higher administrative cost and churn based on what I've read). Your link references the Harvard study on uninsured mortality (which fits the agenda), but it does not mention the Kronick study (which does not). Both credible studies as far as I know. I wasn't surprised that the health expenditure data from CMS actuarial data is not a complete view of spending since it includes a number of extrapolations including enrollment which is limited to a subset of plans in the market (I was actually surprised by this one after reading their methodology early this evening). Since health spending in their model is based on price x enrollment., an under- estimate of enrollment is not a great way of calculating health spending. If I wanted to show that costs are driving premiums, I could focus on large self-insured employers who pay fixed fees to the insurers. If the model outlined in your link were accurate and premiums were growing faster than costs, then you would think that the large self-insured entities were making a profit off their employees since they are responsible for the premiums not the insurers. The premiums are directly correlated to the claims costs for self-insured. If you don't understand self-insured plans, look them up. My simple point is that the information is one-sided, skewed to rally support around a particular goal ( I realize that other organizations are doing the same for the other side of the coin, I've seen this in action as well). Everyone seems to be determining their agenda, then finding or bending the facts to match their agenda. For people in the middle its very frustrating dealing with your types (on both sides of the argument). It would have been great to have seen a really open, transparent, objective process over the past year. No wonder the nation is so divided - each has its own set of facts. Also, if you want to go after insurance companies, you'd be better off pointing to information like this rather than relying on faulty data extrapolations. www.insurance.ca.gov/0400-news/0100-press-releases/2010/release032-10.cfm

Mutternich replied on

<blockquote>I would be interested in knowing how you made your living prior to living off the dole - I'm not expecting a straight answer on this one, but thought I would ask.</blockquote> So the Bad Cop is back again. Thank you, I've already volunteered enough personal information. That's as straight an answer as I think you deserve. I will say, though, that it was almost as though my employer belonged to a Health Plan of the Month Club. A plan would come in offering attractive rates, but then after a while, WHAM! and they were hunting for another new plan. Things are the same now, only more so. Take the burden off employers with single-payer universal coverage. <blockquote>...but if you make over 150% of poverty, pay out of pocket. </blockquote> Is that an <i>order?</i> :-) Oh, sorry, rude of me. I see you've gone up from "not under the poverty line" to 150 percent over it. How generous. <blockquote>I'm not confident about any numbers now after reading the link you posted.</i> Good. Out, but not over.

Trylon replied on

Late in 1993 I began forums in cyberspace to discuss the proposed health care reform by the new Clinton administration. I had the sense to archive the contents of the public debate in compressed ascii text. My personal contribution to Billary was a series of papers for the large committee she chaired. Their efforts and mine came to naught. Reasons for that have been examined by myriad Monday morning quarterbacks - but IMO the best assessment was done by Donald L. Bartlett and James B. Steele in their 2004 book "Critical Condition: How Health Care in America Became Big Business & Bad Medicine". I keep a copy on my bookshelf, next to "The Solid Gold Stethoscope" by Edgar Berman, M.D., 1976. When Barack Obama was elected I got excited about the new possibility for health care reform and dug reference material out of storage boxes. After reading the new book by T.R. Reid, "The Healing of America" I have become a drum major for the sanity he proposes. I have tired to rescue from catacombs the 1990 Walter Cronkite documentary film called "Borderline Medicine" - which suffered worse attack from the MIC than did SICKO. Few people listen to Mike, everybody listened to Uncle Walter, which is why this documentary is not available today in public libraries or for sale on DVD. But the last 15 months of vitriolic debate closer to hate speech, and the tsunami of MIC money being thrown against reform of US health care leaves me emotionally drained, and angry as I can remember being. And it is apoplexy that leads me to suggest the following, outside-the-box, hypothetical scenario. 1. As a nation we cease "cold turkey" attempting to reform health care, and leave matters exactly where they are and have been for more than four decades. 2. On Constitution Mall between the Capitol and the Washington Monument we create two immense pits which bear structural resemblance to BBQ pits. 3. But - these pits would be public crematoria. The one closest to the Capitol would contain the burning corpses of persons whose death can be traced to failure to reform health care. The other pit would be used to cremate persons whose death is known to have Iatrogeneic causes: incompetence or malpractice or system failure. For more than a decade such deaths have been the third highest cause of funeral parlor pickups at hospital, after cancer and cardiac disease. 4. Then we wait to see if the constant smoke and smell over Washington D.C. has the least bit of effect upon the power holders and brokers. How many corpses would we need to burn in pits to convince those who refuse to abandon the status quo? Hundreds? Thousands? Millions? For 40 plus years simply "calling" for health care reform has proven a total waste of time. It is like the meow of kittens. So has voting into office politicians who promise to reform HC, so has demonstrating, by marching or waving signs, so has writing brilliant and cogent books (I have a collection of them), so has making superb documentaries about the need for HC reform (I have a collection of them) and so has making movies like SICKO. What's left? You tell me. What have we not tried?

Anonymous replied on

Upset that your monthly Anthem Blue Cross Health Insurance Premium charges will increase by 39% in 2010 after 2009's 20% increase (in this time of "no inflation")? Just remember that Private Health Care Payments = Government Health Care Payments + 20%. That's all! The "Maximum Benefit Allowance" for over 8000 procedures codes with private health care supplied by Anthem Blue Cross Blue Shield is the Medicare rate (ie: government single payer rate) plus 20%. That is Anthem’s “Maximum Benefit Allowance” even if your private health insurance premiums are double or triple what you would pay into a government option. You pay so much up front as a policyholder of an investor owned health insurance company, while medical providers who actually do the work on you get paid so little out the back door. Why should Anthem pay any more than 20% higher than government reimbursements? Doctors cannot negotiate with large health insurance companies. They simply take what the health plan offers as reimbursement, or they leave the health plan. Private health insurance companies only need to pay out a little bit more than government reimbursement rates to claim the high ground of the "socialized medicine" hot button "debate". But then private health insurance companies work tirelessly to avoid payment, deny treatments, create unending confusion and complexity, increase paperwork for policyholders and providers, etc etc etc.. The great thing about this setup is that private health insurance companies can always shout out how they pay doctors MORE than government health insurance, but they never say exactly HOW MUCH MORE, even if you are paying monthly premiums that are double or triple than what you’d end up paying to the government to buy into medicare… A very large protion of the huge pile of money Americans pay to the health insurance industry is skimmed off as profit for wall street investors, and high salaries / bonuses for executives. Here it is, straight from the horse’s mouth. (exact copy of text from my recent Anthem BCBS rejection of appeal letter requesting payment to a health care provider... < <<<<<<<<<<<< "Anthem's maximum benefit allowance (MBA) is based on a calculation. The calculation is determined by multiplying a payment rate or unit value assigned for a particular service performed by a professional (i.e., a physician) or hospital by a conversion factor. (Unit x Conversion Factor= MBA) The Medicare "Physician Fee Schedule" establishes the payment policies and payment rates for over 8,000 procedures that are performed by physicians and by certain non-physician practitioners such as nurse practitioners, physician assistants, and physical therapists. Payment rates or values are assigned for a particular service, such as repair of a wound or lesion,drain/inject joint/bursa, reconstruct lower jaw bone, etc. (Medicare: Relative Value Unit (RVU) x Conversion Factor = Medicare allowable) To determine the payment rate for a particular service, Medicare applies a conversion factor expressed in dollars. The same conversion factor applies to all services paid under the fee scheduled and is updated annually. Anthem applies its own conversion factor to determine the payment rate for a particular service. Anthem's conversion factor is greater than Medicare's. As a result, Anthem's MBA is greater than Medicare's allowance, and typically is between 1l5% and 120% of Medicare. The unit value used by Anthem is the same value determine by Medicare for its RVU. Medicare's conversion factor : 37 .01 Anthem's conversion factor : 44.04 (@ 119% higher than Medicare)"

HBS82 replied on

Wendell Potter makes a number of good points, but he has thrown in with people whose objectives are to collectivize the economy, and they are just as bad as those Potter "blew the whitstle" on. (He spent half his life working against the forces of oppression and evil – and the other half fighting for them; you figure out which is which.) Instead of having the government grab control of 1/6th of the economy as proposed by the idiotic 2700 pages of legislation known colloquially as "ObamaCare," if we had the moral courage to take ONE STEP AT A TIME, we should be able to agree on any number of BASIC elements, among them portability, intrastate competition,TORT REFORM, private carriers having "assigned risks" divided up among them for those who otherwise would not be able to get coverage, etc. Anyone who has ever seen an EOB where their carrier settled a bill (including your copay) for 22% of the "sticker price" billed (that is, with 78% "written off") knows that free markets have not worked because we don't HAVE free markets. We have providers and carriers engaged in a tug-of-war that leave patients (i.e., the party for who they are supposed to be Hippocratic oath-bound angels of mercy and financial intermediaries, respectively) out in the cold. The best cure for 2700 pages of complexity is frequently simplicity; we can solve THAT one with ONE SIMPLE LAW, the morality of which is self evident. To wit: ______________________________________________________________ The purpose of this Act is to promote free market competition in order to retard inflation of health care prices. (1) Any health care provider shall be free to set its own prices for any given service and to change such prices at will (but not more frequently than daily), AND (2) each health care provider shall be required to charge the same amount to all its patients for each particular service delivered on the same date, regardless of whether or by whom the patient’s care is insured. ________________________________________________________________ One insurance and economics professor told me that carriers "deserve" discounts for the "tremendous volume" they bring providers. I asked him what financial intermediary "deserves" anything at the expense of the principal party it serves; I asked what medical bill is not billed INDIVIDUALLY to one "customer" (the patient). No one buys 500 kidney transplants at once to get a "discount!" Under the two simple rules stated above, providers would be at liberty to set their own prices (the absence of which killed HillaryCare). They would also assume responsibility for setting their rates high enough to cover a reasonable profit and some bad debt experience, along with the cost of collections. Carriers would have to LIST their payout rates for all medical service codes in the contract BEFORE they sold the policy to an end user. Patients need to be financially responsible for any balance left over. THIS IS HOW ANY OTHER FREE MARKET WORKS WITH INSURANCE PLAYING A FINANCIAL INTERMEDIARY ROLE. While other elements (portability, etc.) are needed, they will ultimately fail to provide real reform WITHOUT these rules to rationalize pricing fairly. Further, these two rules in a truly free market would do more to contain inflation in healthcare (and make insurers competitive) than all the other elements added together. Why NOT do this? And why not do it FIRST? NOTES: A. It is immoral to allow the shell game of artificially inflated “Sticker Prices” for health care. In an industry supposedly motivated by altruism and the Hippocratic Oath, it is simply unjust to coerce people into cartels of insurance coverage (whether public or private) and systematically prevent disclosure of real prices – which is exactly what the present system does on nearly every “Explanation of Benefits” form. Whether CIGNA or AETNA pays the bill should make no more difference to either the provider or the patient than the races or religions of doctor and patient. B. The dishonest quotation of fictitious and exorbitant “Sticker Prices” with phony discounts or write-offs applied to them deprives Americans of the competitive effects of genuinely free markets, and should be banned as collusion by federal anti-trust laws. C. The call to fix prices (as in HillaryCare) or coerce employers to provide care as a fringe benefit (ObamaCare) distorts the competitive effects of an otherwise free market, and should be discouraged, if not banned outright as illegal. D. A common objection is “what about those who don’t pay anything?” The truth is, people who are taxpayers and those who are insured are paying for them NOW. Truth in pricing would use free market mechanisms to (1) identify such costs, and (2) bring competition among providers to bear in containing such costs in a way that is not done effectively now. E. Real honesty in pricing will employ free market competition to bring about more reform in health care in one year than all efforts WITHOUT such honesty can in a decade.

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