Monday, February 15, 2010

WellPoint’s Argument for 39% Rate Hike: Adverse Selection - Health Blog - WSJ

WellPoint Inc.Image via Wikipedia

By Jacob Goldstein

News that Anthem Blue Cross is raising premiums 39% for some people in California comes at a convenient time for Democrats looking to regain a little health-care-overhaul momentum.

So it’s no surprise that HHS Secretary Kathleen Sebelius sent a letter calling on the company to justify the rate increase. After WellPoint, Anthem’s parent company, responded with this letter, Sebelius released a skeptical statement that cited WellPoint’s fourth-quarter earnings of $2.7 billion.

The rate increase applies only to policies for people in the individual market. WellPoint’s letter says that, in the troubled economy, many people are choosing to go without health insurance. And many of those who are keeping their insurance are buying cheaper policies that offer less coverage.

The people who do tend to hold onto good insurance plans are those who need them most — people who are already sick. Of course, when you have healthy people bailing out of insurance plans and sick people hanging on, the average health-care cost per person in the plan is going to go way up — and that’s going to be reflected in rising premiums.
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