One of my favorite bloggers, Jaan Sidorov of Disease Management Care Blog, has written a very thoughtful article about the Wellpoint premium increases. He pointed out that public health insurance policy premiums are rising too – sometimes dramatically – and that the problem does not simply lie with a quick explanation about how premium increases must be about driving profits.
Wellpoint has been roundly criticized for the proposed rate increases for CA insureds with individual coverage. The whole situation begs the question: why would they do this if they didn’t have to? I have to assume that the premiums on their policies will still be in the same ballpark as policies offered by other carriers, even after the rate increases. Health insurance companies have to compete with each other just as any other private business does. And for the majority of customers, price is the primary concern. If a health insurance company sets prices that are dramatically higher than those offered by their competitors, they will quickly find themselves insuring only their current members who are too sick to be accepted by a new carrier, and whose medical expenses are likely outstripping their premiums, even after the rate increases.
In Colorado, we routinely see annual rate increases that vary from 10% to more than 30%. They’re spread out across all of the major carriers, and over time their prices tend to keep pace with each other. A company that has a relatively small rate increase one year will likely have a bigger one the next year. A company with the most competitively priced policy one year is likely to be less competitive the next year. And people shop around; many of our clients ask us to revisit their policy options every few years.
I will be interested to see more on the Wellpoint story as the rate increases are investigated this spring, but I imagine that it’s not a simple problem or one that has a simple solution. It’s true that Wellpoint is in business to make money. But a dramatic, highly publicized rate increase is bad for business, and it’s hard to explain it away as a company simply trying to raise profits.
Jaan’s article was included in the Cavalcade of Risk this week, hosted by David Williams at the Health Business Blog.