California blues 

Certain politicians have taken on California’s 39 percent health care rate hike as a populist cause. Dumb move, especially with Obamacare teetering on the brink. If (and I readily admit it’s a big "if") the real story comes out, it’ll be a gift to health care reform opponents.

What is it about California that makes it a target for WellPoint’s greed? Does WellPoint, and its California subsidiary Anthem Blue Cross, just not like the state? Or are these rate hikes the cost of doing business in a state with a suffocating regulatory environment of which health care reform proponents wish to emulate nationwide—costs that are, of course, passed on to consumers.

Under federal COBRA rules, unemployed policyholders are allowed to keep their health benefits for 18 to 36 months after separation. But California goes one further, and bars Anthem from dropping these customers even after federal COBRA coverage runs out. According to the Wall Street Journal, California also caps what Anthem can charge these post-COBRA customers. The most damage, however, comes from monkeying with adverse selection, a lesson for those advocating for a prohibition on denials for pre-existing conditions (takes the pesky insurance portion of insurance reform).

“Most other states direct these [post-COBRA] customers to high-risk pools that are partly subsidized, but California requires the individual market to absorb the customers and their costs. Even as California insurers have had to keep insuring these typically older and sicker patients, the recession has driven many younger, healthier policy holders to drop their insurance—leaving fewer customers to fund a more expensive insurance pool,” according to the paper. “This explains why Anthem lost $58 million in California on its post-COBRA customers in 2009. If WellPoint didn't raise premiums amid these losses, it would soon be under assault from its shareholders, if not out of business.” [Emphasis mine.]

As with the AIG debacle, populist sensationalism trumps facts, with Congressman Henry Waxman currently passing ‘round the torches and pitchforks. With most of the media playing along, the aforementioned “if” just got a whole lot bigger.

• • 2/18/2010 3:50:18 PM
  • Wade
  • California Blues
  • When CA was entertaining the thought to extend the COBRA run out almost every respected professional in the health insurance industry predicted what would happen. Well, it did! In my personal opinion, CA politicians (majority) simply don't care because they want forced government control. How else can you explain such an irrational decision? My sister was laid off recently, she is currently under COBRA and her employer did an excellent job helping her to understand how COBRA works. In CA that’s not really necessary is it? Other than knowing what percentage of premium you have to pay, you’re covered until you decide not to be. Why doesn’t CA just force their insurance companies to insure everyone, no matter what? They do, it's called CobrA.
• • 2/18/2010 10:00:56 PM
  • Harlan Bakken
  • above article
  • I think most of the problem here can maybe be traced to Wellpoint. This is the first article I've read that tells about Anthem's Cobra and post cobra loss. When they announced the 39% increase either they didn't elaborate OR the drive-by mediaa chose to ignore it. Whatever happened, the only thing the public read or heard was that another greedy insurance company is sticking it to the policyholders. This is the biggest objection, among many lesser objections, that I have to O'Bama's wanting to provide the Government Plan option to his doomed National Health Insurance Plan. I don't remember very many government "Insurace" plans that are solvent. Politicians are supposed to be literate, but a large number of them certainly don't seem to think that an insurance program has to be operated on sound actuarial and financial principles. For example, consider Social Security, Medicare, The Pension Guaranty Plan. If they would establish a sound program, sooner or later they will tinker with it so that it becomes unsound.