WellPoint, White House sling reform studies

At this point in the health reform debate, you have to take numbers from any side with a grain of salt. That said, Indianapolis-based
WellPoint Inc. has done perhaps the only local analysis of how proposed reforms would affect the cost of health insurance
for employers.

Its conclusion? Reform would generally reduce premiums for Indianapolis companies with workers in
poor health but raise them for Indianapolis companies with workers in good or average health.

An eight-person firm
in Indianapolis with unhealthy workers would enjoy a 23-percent premium cut under health care reform. But WellPoint figures
that a firm the same size with workers in average health would suffer a 20-percent increase. And an eight-person firm with
healthy employees could see its premiums shoot up nearly 94 percent.

The increases do not
include any rise in medical costs, which have been going up about 6 percent each year.

WellPoint
did similar studies in each of the 14 states where it operates Blue Cross and Blue Shield plans. It said
it did the studies at the request of legislators in those states.

But President Obama’s administration immediately
criticized WellPoint for failing to give enough credit to the cost-saving measures of health care reform:
low-cost policies and subsidies for young adults, government-sponsored reinsurance to reduce the cost
of catastrophic care, and lower sales and marketing costs for insurers because they can sell policies
through a government-run health insurance exchange.

“The WellPoint study arrives at its conclusion
by cherry-picking certain policies and ignoring major aspects of reform that would affect both the number of people covered
and the premiums they would pay,” spokesman Jesse Lee wrote on the White House blog.

WellPoint said it did
not include the administrative savings of the health insurance exchange because it believes the government will assess insurers
to pay to operate the insurance exchange, offsetting any administrative savings.

WellPoint’s analysis did
include the impact of federal subsidies to help Hoosiers buy insurance. It also
factored in savings that would come, for some customers, because WellPoint could
no longer charge more based on health status and gender—and would be restricted in
how much it could charge to older customers.

Health reform also would require WellPoint and its peers to insure
anyone who applied. Insurers said such a “guaranteed-issue” policy must be coupled with a mandate for everyone
to buy insurance.

But WellPoint assumes that proposals in Congress would not create stiff enough fines to make
the insurance mandate effective. WellPoint fears that individuals won’t buy insurance—or sign up for their employer’s
insurance—while they’re healthy. But when they get sick, they’ll buy.

Such “adverse selection”
will force WellPoint to raise employers’ premiums by 12 percent to cover the higher medical claims, WellPoint concluded.
For individuals, WellPoint assumed a premium spike of 50 percent because of the weak mandate.

Critics have suggested
that those assumptions are too high, but Rob Hillman, president of WellPoint’s Indiana subsidiary, Anthem Blue Cross
and Blue Shield, said similar laws in Massachusetts have resulted in people buying insurance once they’re
sick, racking up huge bills, and then canceling their coverage.

“It’s not a stretch
when you begin to look at how things have played out in other states,” he said.

Employers
would have less wiggle room on the benefits they offer because health reform proposals would require
policies to cover at least 65 percent of medical claims the plan members are allowed to make.

But 16 percent of WellPoint’s Indiana customers currently offer health plans that cover lower
percentages of benefits. They would have to raise their coverage rates by an average of 10 percent.

Another
9 percent of WellPoint’s Indianapolis customers would have to reduce their benefits if they wanted to avoid the health
reform tax on “gold-plated” insurance plans.

And if employers want to stop offering insurance, they
would have to pay a tax of up to 8 percent of their payroll.

“I see it as a no-win situation for small businesses,”
Hillman said.

But the Obama administration has countered with a report that stresses the money-saving
measures for small businesses. It notes that nearly 77,000 companies in Indiana would be eligible for
premium tax credits to reduce their burden.

It emphasized that small employers would have
access to low-cost plans in the health insurance exchange, which could save
their employees as much as 28 percent on premiums compared with average family policy premiums
today.

And it added that, by insuring more people, health reform would
reduce the “hidden tax” that comes from shifting the costs of
caring for the uninsured on to those who are insured.

“Health insurance reform will
lower premiums for small businesses,” it asserted.