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WellPoint, White House sling reform studies

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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.

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