This is a copy of a letter I sent to Dave Jones, the Insurance Commissioner for the State of California:
Dave Jones
Insurance Commissioner
California Department of Insurance
Dear Dave:
I heard on the news this morning that Anthem has decided to pull out of the small business portion of the upcoming health exchange, "Covered California," and as such, will not be part of the state-run exchange under the legislation known as "ObamaCare." In reading through articles on this topic, it appears that quite a number of insurance companies have opted out of one part of the plan or another. Added to that, several articles have pointed out that the cost of individual plans under the new exchange will actually be priced higher than before. For myself, what little has been released already shows that a plan for which I would be eligible would cost 22.5% more than that same plan costs today. Since I cannot afford the current price, there is no way that I will be able to afford the increased price.
My question to you is, why are you allowing this? We elected you to this office to protect us from the insurance companies that would rip us off, yet you seem to be disinterested in our needs. I would suggest that you implement the following regulations for the new exchanges:
First, any insurance company that offers health insurance and sells any insurance in California must sell on the exchange. This would include both individual and group plans. The only insurance companies that can opt out are those that do not write these policies anywhere. Otherwise, they must offer the plans or leave the state. I seriously doubt that any will leave.
Second, no insurance company can opt out of selling any lines within the state that they offer in other states. This means that if Aetna (as an example) wants to sell any insurance in California, it must continue to offer individual plans here as well. If it stops offering individual lines altogether, then it can stop selling them in California. If it writes individual insurance in any state, it must write it here. (While not actually part of this topic, this would also mean that earthquake insurance must be offered here by any carrier who writes it outside of the state. That would drive down rates considerably.)
Third, your office should do a thorough check of prices for policies on both individual and group levels and come up with an average rate per plan. That rate should be discounted by 40% and that should be the cap of any plan in the exchange. While we commonly refer to this as "ObamaCare" the actual name is the "Affordable Care Act." Insurance rates are entirely too high, which is the main reason why so many of us are without health insurance. The Act mandates that these rates be affordable and it is the responsibility of the state to ensure that they are. Thus far, the state has done a very bad job of this, since most of the rates that have been presented are higher than before.
Dave, we need your help. And you need to do your job. Stand up to the insurance companies. That's what we pay you for.
Sincerely,
Mr. Patt Gavin
Showing posts with label Insurance. Show all posts
Showing posts with label Insurance. Show all posts
Friday, July 19, 2013
Tuesday, March 2, 2010
Anthem Blue Cross' 39% Rate Increase
When I heard the news that Anthem Blue Cross intended to raise premiums by as much as 39% for Californians, I was a bit puzzled as to why such a hefty increase would be necessary. When the reason was stated as "rising healthcare costs" I realized that Anthem Blue Cross was not being honest.
While it is true that healthcare costs do increase, those increases do not have any effect on the profits of an insurer. Let me give an example that will help to explain this:
Dr. Jones and Dr. Smith are both medical doctors, sharing an office in Los Angeles. They both charge $100 for a physical exam, with an additional $50 for x-rays. Dr. Jones accepts all PPO insurance plans (including Anthem), but is not an in-network provider. Dr. Smith also accepts PPO plans, but is in-network with Anthem.
Mary and Blanche are patients of Dr. Jones and Dr. Smith, respectively. Both women are policy holders of Anthem Blue Cross and have PPO insurance plans. When Mary sees Dr. Jones, her insurance is charged $100 for the visit and $50 for the x-rays for a total of $150. When Blanche sees Dr. Smith her insurance is charged the same.
According to Anthem's Fee Schedule, they allow $60 for an office visit, paid at 100% and $30 for x-rays, paid at 75%. This means that Anthem will pay $60 for the office visit and $22.50 (75% of $30) for the x-rays for a total of $82.50. Since Dr. Smith is an in-network provider, he has agreed to accept Anthems fees rather than his own. His $150 invoice is reduced to $90 (he writes-off the remaining $60) of which Anthem pays $82.50 and Blanche pays the remaining $7.50. Since Dr. Jones is not an in-network provider, he accepts Anthem's payment of $82.50, but then bills Mary for the remaining $67.50. He does not have an agreement to accept Anthem's fee schedule, so his fees are what he charges.
Note that in both cases Anthem pays the same amount.
Now, let's assume that Dr. Jones and Dr. Smith both raise their rates by 10%. This increase only matters to the policy holders. Anthem does not raise their fees because doctors raise theirs. In fact, they have limitations on how often a doctor may raise their fees. For out-of-network doctors, the increase in their fees will be passed along to their patients. For in-network providers, the increase in their fees must be written-off as they are still bound by Anthem's fee schedule. Anthem agrees to pay $60 for an exam. Whether an in-network provider charges $100 or $1,000 they still can only collect the $60 agreed-upon fee.
What this means is that Anthem blatantly lied when they claimed that rising healthcare costs were the impetus for their increase in premiums. Under questioning from the legislatures, however, Leslie Margolin (President of Anthem) and her cronies changed their tune. They claimed that due to the economic downturn many healthy individuals had dropped their healthcare coverage as it had become too expensive to keep. Those people who needed the coverage because of existing medical conditions kept the coverage, but were now costing the company too much money resulting in $68 million in losses.
From the sound of it, it would seem that Anthem has a good argument for raising rates, but consider that with $68 million in losses Anthem still managed to pay $39 million in bonuses and spent another $27 million on executive retreats. If these unnecessary bonuses and retreats had been curtailed, their losses would effectively have been reduced to $2 million. Added to this, if their need for revenue was due to policy holders dropping coverage because they could no longer afford the premiums, reducing the premiums would have kept those policy holders, and possibly attracted more, resulting in increased revenue for the company, since by their own testimony many of those who had dropped their coverage were healthy and rarely used the coverage.
It seems that Anthem did just the opposite of what it should have done. Rather than a) reducing spending and b) lowering premiums to hold on to policy holders, Anthem chose to a) spend wildly and b) raise premiums, which would result in even more loss of policy holders.
Now Leslie Margolin is surprised that the legislature wants the government to regulate insurance rate increases. Go figure.
While it is true that healthcare costs do increase, those increases do not have any effect on the profits of an insurer. Let me give an example that will help to explain this:
Dr. Jones and Dr. Smith are both medical doctors, sharing an office in Los Angeles. They both charge $100 for a physical exam, with an additional $50 for x-rays. Dr. Jones accepts all PPO insurance plans (including Anthem), but is not an in-network provider. Dr. Smith also accepts PPO plans, but is in-network with Anthem.
Mary and Blanche are patients of Dr. Jones and Dr. Smith, respectively. Both women are policy holders of Anthem Blue Cross and have PPO insurance plans. When Mary sees Dr. Jones, her insurance is charged $100 for the visit and $50 for the x-rays for a total of $150. When Blanche sees Dr. Smith her insurance is charged the same.
According to Anthem's Fee Schedule, they allow $60 for an office visit, paid at 100% and $30 for x-rays, paid at 75%. This means that Anthem will pay $60 for the office visit and $22.50 (75% of $30) for the x-rays for a total of $82.50. Since Dr. Smith is an in-network provider, he has agreed to accept Anthems fees rather than his own. His $150 invoice is reduced to $90 (he writes-off the remaining $60) of which Anthem pays $82.50 and Blanche pays the remaining $7.50. Since Dr. Jones is not an in-network provider, he accepts Anthem's payment of $82.50, but then bills Mary for the remaining $67.50. He does not have an agreement to accept Anthem's fee schedule, so his fees are what he charges.
Note that in both cases Anthem pays the same amount.
Now, let's assume that Dr. Jones and Dr. Smith both raise their rates by 10%. This increase only matters to the policy holders. Anthem does not raise their fees because doctors raise theirs. In fact, they have limitations on how often a doctor may raise their fees. For out-of-network doctors, the increase in their fees will be passed along to their patients. For in-network providers, the increase in their fees must be written-off as they are still bound by Anthem's fee schedule. Anthem agrees to pay $60 for an exam. Whether an in-network provider charges $100 or $1,000 they still can only collect the $60 agreed-upon fee.
What this means is that Anthem blatantly lied when they claimed that rising healthcare costs were the impetus for their increase in premiums. Under questioning from the legislatures, however, Leslie Margolin (President of Anthem) and her cronies changed their tune. They claimed that due to the economic downturn many healthy individuals had dropped their healthcare coverage as it had become too expensive to keep. Those people who needed the coverage because of existing medical conditions kept the coverage, but were now costing the company too much money resulting in $68 million in losses.
From the sound of it, it would seem that Anthem has a good argument for raising rates, but consider that with $68 million in losses Anthem still managed to pay $39 million in bonuses and spent another $27 million on executive retreats. If these unnecessary bonuses and retreats had been curtailed, their losses would effectively have been reduced to $2 million. Added to this, if their need for revenue was due to policy holders dropping coverage because they could no longer afford the premiums, reducing the premiums would have kept those policy holders, and possibly attracted more, resulting in increased revenue for the company, since by their own testimony many of those who had dropped their coverage were healthy and rarely used the coverage.
It seems that Anthem did just the opposite of what it should have done. Rather than a) reducing spending and b) lowering premiums to hold on to policy holders, Anthem chose to a) spend wildly and b) raise premiums, which would result in even more loss of policy holders.
Now Leslie Margolin is surprised that the legislature wants the government to regulate insurance rate increases. Go figure.
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