March 4, 2010

Anthem case shows flaws in system

Reducing Administrative

— Anyone looking for evidence about what's wrong with our health care system need go no further than Anthem Blue Cross Blue Shield of Maine's appeal of a state-approved 10.9 percent rate increase for individual policies.

The problem for the company is that it wanted an 18.5 percent increase, which it says would have resulted in a reasonable 3 percent profit on those plans this year.

The problem with that for the state is that while Anthem may not make money on its individual plans this year at the lower increase, it still would likely make a profit in Maine when all of its products are taken into account.

The case is now before a judge in Kennebec County Superior Court, but regardless of the outcome, the verdict against the system is in: Something is terribly wrong here.

With the exception of the people who have no insurance at all, consumers who buy individual policies are the biggest losers in our health care system.

People who are self-employed or who work for companies that do not provide benefits pay higher rates than big employers, who are able to negotiate group rates. As a result, individuals are more likely to buy plans with higher deductables and out-of-pocket costs, and often self-ration preventative care to keep control of their expenses.

Because they have no market clout, they are vulnerable to rate increases that could price them out of coverage, like the ones at issue in the Anthem case.

The problem is a health care system where no one knows what anything costs, and every payer gets a different price. For instance, Medicare can set reimbursement rates for the elderly and disabled consumers it represents, and if the real costs go higher, other payers pick up the slack.

Down at the end of the chain are the individual policy holders, and there is no one left to make up the difference for them.

Solving the problem of the individual market could be the key to controlling costs throughout the system. Choosing an insurance plan is really the only time that a health care consumer really acts like a consumer, weighing price, value and benefit before making a decision.

If they could form groups and negotiate for affordable rates, that would create a check on rising costs.

Until that happens, the state has taken the right position of Anthem's rate request. The company would have a right to complain if the new individual rate would cause it to lose money in Maine. But even with a smaller increase -- which would be a hardship for the people who pay the premiums -- Anthem could still make a profit here, as it has since 2004.

According to the Attorney General's Office, Anthem's nine highest paid administrators in Maine made more than $4.3 million in 2006. By reducing administrative expenses, the company could add to its profit margin.

A ruling against Anthem would be a victory for consumers in the individual market, but a small one. A double-digit increase is still a lot to swallow in this economy.

Real relief will have to wait for the federal government to act and institute a fair health care system in which everyone has access to affordable insurance coverage.

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