Anthem: The Poster Child for Reform

[ABC]

Unless you have access to internal loss reports, public figures on earnings won't give you that kind of information. COBRA/ARRA is nothing more than a taxpayer subsidized national risk pool with the government taking none of the risk. Risk pools and HIPAA conversions are money losers all around.

The subsidy won't sink the carriers but it will have a spillover effect on other lines of coverage in their health portfolio.

Overall, carriers are getting killed on small group, individual and COBRA.

I am being told that the Subsidy is why we are seeing 30+% rate increase on small group and Indy.

Now I am going to call BS on them if they have huge profits 1st quarter of this year. The CEO of Wellpoint is a complete fool. She has no clue what is going on in the trenches.

 

[somarco]

The subsidy will have an impact but their COBRA business is not large enough to warrant 30% rate increases spilling over to other lines.

Overall, the carriers are seeing disturbing trends in their total health insurance block. Declining numbers of insureds, healthy ones rolling the dice and going naked, sicker folks losing employer health insurance and applying for individual plans. It is not a pretty sight.

Health Insurance Premiums Rising - Underwriting Getting Tougher

 

[Crabcake Johnny]

Rate increases:

1) Lack of cost controls
2) Lack of price transparency
3) "Superman complex" prevents some of the healthy from obtaining coverage
4) No mandate, people can cancel at will. When times get tough the healthy cancel
5) We're among the most unhealthy nations in the world - addicted to bad eating habits and prescription medication as a "cure all."
6) Everyone wants to be rich; pharm companies, med equip companies, health carriers, doctors, etc...There is only so many ways to carve up a dollar
7) Because the carriers can. Dumping the old block with a huge increase purges a lot of the potential claims - then they can get a fresh influx of underwritten business
8) Out of control state mandates
9) Innovation is costly; the latest in medication and medical technology

 

[Winter_123]

Rate increases:

1) Lack of cost controls
2) Lack of price transparency
3) "Superman complex" prevents some of the healthy from obtaining coverage
4) No mandate, people can cancel at will. When times get tough the healthy cancel
5) We're among the most unhealthy nations in the world - addicted to bad eating habits and prescription medication as a "cure all."
6) Everyone wants to be rich; pharm companies, med equip companies, health carriers, doctors, etc...There is only so many ways to carve up a dollar
7) Because the carriers can. Dumping the old block with a huge increase purges a lot of the potential claims - then they can get a fresh influx of underwritten business
8) Out of control state mandates
9) Innovation is costly; the latest in medication and medical technology

and lawyers driving defensive medicine

and, the fact the consumer doest have any dog in the fight once they have insurance and have passed their deductible. Why would you be asking your doctor if a procedure is really needed or if less costly resources might be available? That could only mean you dont have insurance. Otherwise, you want to get your money's worth.

 

[Mr. Bill]

Flashback (for Bill Clinton):

NHS could ban life-saving heart device 'because it's too expensive' | Mail Online

 

[somarco]

Those are all things that have an impact on the basic premium but new business and renewal rates are driven primarily by loss ratio's. Loss ratio's are driven by medical inflation, utilization and claim severity. Inflation is the smallest component of the three while utilization is the least predictable and the one that has the biggest impact.

On a 30% renewal bump maybe 20% of that (about 6% of the rate hike) is due to inflation. A spike in the severity of claims might add another 3%. The remainder is the carriers estimate of future utilization.

When claims are trending up while premiums are drifting downward (fewer paying members) you have a perfect storm brewing.

 

[Crabcake Johnny]

Then it's a catch 22 - since the carriers increase the rates it stunts growth.

 

[somarco]

There is always some fall off as premiums rise. Individuals and groups play musical chairs and move to another carrier if they can find one that is willing to take them in at a lower price.

Problem we have now is the economy. More people out of work, fewer "discretionary" dollars available, more people willing to go naked if they are healthy.

In the 35 years I have been in this industry I have never seen a time like this. For sure, we have had dips in the economy and high unemployment, but this is deeper and more complex than any of the others.

We are in a hard market for health insurance and it is compounded by fewer dollars flowing in. My guess is, if you were to look at carrier income by quarter and line of coverage you would see a noticeable drop in individual and small group premiums along with a corresponding upward trend in claims.

 

[jsd1239]

Maybe they are taking a page from the bankers playbook, raise the rates before legislation passes and the laws go into effect. They might be jumping the gun on that though.

 

[somarco]

Humana is laying off, as did Aetna, Wellpoint and Cigna.

Why?

Dropping premium revenue means fewer dollars to work with and increased pressure on loss ratio's.

Wouldn't expect the folks in DC to understand that. They are hiring and spending money like it grows in trees in the face of the recession.