Earlier this year Anthem Blue Cross of California (owned by Wellpoint Inc.) announced that it would be raising its insurance premiums by up to 39% this year. Is this increase justified, or are they just trying to increase premiums before the Federal government regulates premiums if the Healthcare reform bill passes?
The facts don’t seem to warrant the large increase in premiums requested by Anthem Blue Cross. WellPoint CEO Angela Braly says its customers’ healthcare costs only went up 8.9% last year. In fact, even 8.9% seems high, given what actuaries at the Department of Health and Human Services indicated in a recent report. To be fair, the increase in premiums anticipates a large increase in healthcare costs in the coming year.
Another reason given by WellPoint Inc. for the large increase is the poor economy. When times are tough, healthy people don’t buy healthcare insurance, so that means that the insured pool is smaller and sicker, requiring more healthcare. This is probably a valid argument, but the Healthcare reform bill would remedy this problem by mandating that everyone buy healthcare insurance.
Consumers and legislators are complaining loudly about the proposed increases. Two members of the House Energy and Commerce have asked for an investigation into this premium increase. A hearing is set for February 24, 2010 in the House chamber. WellPoint Inc. executives are asked to be present to relate the facts that warrant this increase.
WellPoint Inc., the nation’s largest health insurer by membership, had a net income of $2.7 billion, or $5.95 a share, in the fourth quarter of last year, compared with profit of $331.4 million, or 65 cents a share, for the same period the previous year. This is an eight-fold increase over last year’s income. This would indicate that the insurance business has been good during the past year.
In all probability, Well Point is simply trying to increase premiums and thus revenue ahead of the mandates required by the Healthcare reform bill, should it pass. These include:
- The requirement to accept persons with pre-existing conditions
- Regulations on rates and premiums
- Mandated coverage required in each policy
The executives at WellPoint Inc. have determined that their profitability will be adversely affected by the Healthcare reform bill, so they are just trying to remain viable as a company. By obtaining a premium increase before the regulations and mandates of the Healthcare reform bill take effect, the executives of WellPoint Inc. are looking to stay viable.
Interestingly, President Obama’s proposal that he unveiled a couple of weeks ago had a provision that would retroactively address just these types of situations. The constitutionality of any retroactive regulation would probably be challenged in court.
The California Health Care Almanac recently released its annual report on the uninsured in the state. The report has been released annually for over 20 years and over that period the percentage of Californian’s, who are not eligible for Medi-care, and are not covered by an employer’s healthcare insurance has risen by 9%. The rate of uninsured Californian’s has risen only 6 tenth of one percent in the past 8 years, from 20% in 2000 to 20.6% in 2008 (The latest year that statistics are available). California has a higher percentage of uninsured residents than the National average and the largest actual number of uninsured individuals—6.6 million.
The general trend of the healthcare insurance picture in California is that both the number and percentage of residents that are uninsured is increasing at a rate that is slightly greater than the rate of the uninsured in the nation as a whole. While California has the largest number of uninsured individuals of any state, it ranks 8th for the number of uninsured when stated as percentage of population with a rate of 20.5%. The national average for the uninsured is 17.5%, and Texas has the highest percentage of uninsured residents at 27.6%
The trend for who provides the healthcare insurance coverage is changing from privately provided coverage to publicly provided coverage. Employer provided healthcare insurance has declined by 5.2% over the past 8 years, while individually purchased healthcare insurance has increased only 1.1%, leaving the public to provide healthcare insurance to increase by 3.6%. The number of people eligible for public healthcare insurance is increasing faster than the number of individuals receiving public healthcare insurance.
An interesting statistic is the one concerning the changes in the types of insurance coverage in different income brackets. The insurance coverage source (private, public, or uninsured) stays essentially the same in the lowest (under $25,000/year) and the highest (over $75,000/year) income brackets. The trend in the two middle ($25,000 – $75,000) income brackets is moving from private sources to public sources and uninsured. The percentage of the two middle income groups who rely on public sources for their healthcare insurance has essentially doubled from 1994 to 2008
The highest number of uninsured residents is among the self-employed and those working for employers with less than 25 employees. It is curious to note that among residents employed by the public sector, the uninsured rate is 8.3%, higher than the national average for public employees.
As is to be expected, the rate of uninsured individuals is highest in the younger age groups when children are no longer covered by their parent’s healthcare insurance plan. Younger individuals tend to have lower family incomes and the lower income brackets also have higher uninsured rates than higher income brackets
The percentage of uninsured individuals differs along racial/ethnic lines as well. The only ethnic group that has a larger percentage of uninsured individuals than the state average is the Latino group at 29.9%. The report also lists the uninsured rate of non-citizens in California at 48.3%.
Analysis of the Data
While the report is titled ‘California’s Uninsured’, it spends a significant amount of time tracking the trends on who provides the source healthcare insurance. Whether the individual is covered by employer provided healthcare insurance, privately purchased healthcare insurance, or publicly funded healthcare insurance, the aggregate will be the total of insured residents. If you do not have healthcare insurance it doesn’t really matter to you who provides the healthcare insurance for those who have it.
One statistic that clearly demonstrates a major flaw in the entire healthcare insurance system is the number of individually purchased healthcare plans. Only 7.7% of residents purchase their own healthcare insurance. This means that very few California’s are taking responsibility for their own healthcare.
The fact that California’s uninsured rate is slightly higher than the national average can be explained for two reasons:
1) California’s population is younger than the national average, and many young people make the sound financial decision to forego healthcare insurance.
2) California has a high rate of non-residents, and non-residents have a very high rate of uninsured for healthcare. Latinos account for 58% of California’s uninsured population.
The complete study can be found in the California Health Care Almanac: California’s Uninsured, December 2009
Over the past decade many governmental entities and private organizations have tried to quantify the quality of healthcare in America. The bottom line is that there is wide variance in the quality and cost of healthcare through the United States. It is hoped that by tracking the results of the various studies that are being conducted around the country, that the quality of healthcare can be improved while the increase in the cost of care can be restrained.
The California Healthcare Foundation has sponsored a comparative study which compares the quality of California Healthcare to that in the rest of the Nation. If the state of California were in school it would receive a ‘C’ for the performance of its healthcare system, compared to the rest of the nation.
California outperforms the National average in:
- Maternity and child healthcare
- Hospital care of patients with heart problems and pneumonia
- Cancer rates and cancer mortality rates
California underperforms the National average in:
- Care for geriatric patients
- Nursing home quality of care
- Diabetes diagnosis and treatment
California has about average care in:
- Hospital re-admission rates
- Improvement in hospital treatment of Pneumonia and Heart disease
- Home healthcare providers
In the years covered by the study (2001 – 2005), the average annual increase in healthcare costs was 6.5 %, while the increase in quality of healthcare grew only 1.4%. This suggests that there is room for improvement in the cost effectiveness of healthcare throughout the Nation.
The most interesting result of the study is that California outperforms the National average in the care of the younger portion of the population. California scored high in care of expectant mothers, infants, and children. California performed well on measures related to pre-natal care, low birth weight, and low infant mortality rates. California ranked high in birth-related traumas, immunization levels for children, and reduction in admission rates of certain pediatric conditions.
Treatment for cancer and heart related conditions are at the national level of care, or slightly above the national average. Measures of standard of care in surgical treatment in hospitals and outpatient care are inline with the national averages.
At the other end of the population age scale the State under performed in most categories of geriatric care. The number of seniors receiving vaccinations is below the national average. End of life care is measured as falling below the National standard of care, and the quality of nursing home care falls short of the national average.
It is important to note the California improved in its treatment of Pneumonia, cancer, and heart related cases faster than the national average. This may indicate that the standard of care in California is improving at a faster rate than the nation as a whole. However, there were still total of 1031 preventable adverse events in California hospitals in 2007. Since 2007 a total of 57 hospitals were fined $25,000 for each licensure violation.
ANALYSIS OF THE DATA
The data from this study would seem to indicate that the California healthcare system does a good job in treating the younger segment of the population. It does an average job in treating health conditions of the general population. But it does a poor job in the treatment of the older segment of the population. This may be because the population of California is younger than the average population throughout the rest of the nation. Perhaps more emphasis is placed on the younger patients, or California attracts better qualified doctors because of the younger population. In any case, the state of California may want to reallocate its healthcare resources to provide better healthcare for the geriatric portion of its population. This will become even more important as the population ages.
The complete study can be found in the California Health Care Almanac: Quality of Care facts and figures, August 2009
