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Proposed Anthem Rate Hike Stirs Reform Waters

After a year of shifting tides and volatile swells, health care reform waters became almost placid earlier this month, worrying reform proponents and pleasing opponents.

But the waters are stirring again.

Anthem’s plan to raise premiums for individual policy members in California hit like a large stone — and the ripples just keep coming. Legislators in Washington, D.C., and Sacramento are holding hearings and launching investigations this week. President Obama, on the eve of his health care reform summit this week, points to Anthem Blue Cross rate hikes as proof the system needs an overhaul.

Another ripple, small now but with growth potential, could someday put the matter in voters hands. A frustrated Anthem member filed papers with the California secretary of state last week to launch a statewide ballot initiative to freeze insurance rates at their January 2010 rates then limit increases to a maximum of 10% a year, if approved by the state insurance commissioner.

Even if the initiative’s language passes bureaucratic and legal muster, its late start makes it unlikely to make it onto California’s already crowded November 2010 ballot. But the fact that such a campaign is under way at all serves as another symptom of an increasingly dysfunctional health care system.

Little Regulation in California

“I realize it’s very unlikely this will get onto the November 2010 ballot, but I’m committed to making this happen,” said Robert Goldstein, the initiative’s sponsor. “If we can’t get it done in time for November, we’ll keep at it until the next opportunity.  This is too important and too frustrating to let it go.”

Goldstein contends that California voters, who he says are largely not aware that health insurance premiums are not regulated by the state, would embrace an opportunity to have a voice in what he says is unbridled insurance increases.

Goldstein, 60, owns a management consulting company in Southern California. He said he’s not been involved in health care policy or statewide campaigning of any sort until now. He and his wife, who have been covered by Anthem Blue Cross individual policies for 20 years, were among the 800,000 Californians notified this month that their monthly premiums were going up, some by up as much as 39%. Goldstein’s were to go up 35%.

“My wife and I are on the PPO Share 5000 plan.  We have current benefits of $40 copay for doctor visits, a $5,000 deductible each, an out-of-pocket of $7,500 each, a $750 pharmacy deductible each and the new rate for us would be $805 per month,” Goldstein said.

“I couldn’t understand how this could be,” Goldstein said. “Weren’t there any state regulations to keep this from becoming unreasonable?”

California is what’s known as a “file and use state,” meaning insurers need only file their intent to increase rates in the individual market and then use them. They do not need state approval. In other states — “prior approval states” — insurers must present a case for increasing premiums and be granted permission.

The main regulation governing individual health insurance in California is that 70% of premiums must be used to pay claims. Several states require a greater percentage be used to pay claims.

Although he hopes to speed the process by collecting signatures through the Internet, Goldstein is getting a very late start on a giant task of collecting and verifying close to 500,000 signatures over the next two or three months.

Officials at the secretary of state and attorney general’s offices would not discuss details of the initiative yet.

A spokesperson at the secretary of state’s office said it might be possible to post an initiative petition on the Internet for a voter to print out, sign, and physically return to the initiative’s proponents, as long as it meets all the statutory requirements of an initiative petition that is circulated in person. 

However, it is not legal under the California Elections Code for voters to sign a petition “on the Internet” using a digital signature and transmit the petition to the proponents by way of e-mail or other electronic device.   

Insurers Blame Rising Medical Costs

Officials at Anthem Blue Cross and WellPoint, Anthem’s corporate parent, referred questions to the California Association of Health Plans, a trade group representing insurers, including Anthem.

“With medical costs growing two to three times faster than the economy, rate regulation does nothing to improve health care affordability,” said Charles Bacchi, executive vice president of the association.

“In these difficult economic times, people are struggling to pay for many of life’s necessities.  If we want to ensure everyone has quality health care coverage, we must focus on the biggest drivers of health care costs — the skyrocketing cost of medical care,” Bacchi said.

WellPoint and other insurers say the individual market is especially expensive now because younger, healthier members tend to reduce coverage or drop it all together during economic hard times, leaving older, more expensive members as a higher percentage of the insurance pool. WellPoint officials said the company lost money in the individual market last year in California.

Overall, WellPoint posted $2.7 billion in profit in the last quarter of 2009.

Another Legislative Stab at Regulation

Assembly member Dave Jones (D-Sacramento), chair of the Assembly Health Committee and a candidate for state insurance commissioner, has twice introduced legislation to make California a prior-approval state. He plans to do it again.

He said he’ll soon introduce a bill requiring insurers and HMOs to get prior approval for rate hikes from the Department of Managed Health Care or the Department of Insurance. Although Jones, like many legislators, would prefer a single payer plan, he says interim rules like this are needed as the slow march toward reform continues.

Hearings and Investigations

Anthem’s rate hikes sparked several hearings and investigations getting under way this week in Sacramento and Washington, D.C., including:

  • Assembly member Jones scheduled a legislative hearing on health insurance rate increases “to assist the Legislature in determining what policy response is needed to protect Californians from rate hikes like the 39% increases announced by Anthem Blue Cross.” Jones invited Leslie Margolin, president of Anthem Blue Cross, and other insurance industry representatives.
  • Rep. Henry Waxman (D-Calif.), chairman of the House Committee on Energy and Commerce, has launched an investigation of WellPoint’s business practices. He asked company representatives to provide expenses, claims data and correspondence — including internal e-mails — about rate increases.  A congressional hearing on the matter is scheduled this week.
  • Sen. Dianne Feinstein (D-Calif.) plans to introduce legislation this week that would expand federal authority over health insurance premiums. Her bill would allow the secretary of HHS to review, modify or deny “unjustified” increases in file and use states such as California.

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