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After WellPoint ‘Overstated Future Medical Costs’ To Justify Premium Hikes, Other States Checking Their Math

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"After WellPoint ‘Overstated Future Medical Costs’ To Justify Premium Hikes, Other States Checking Their Math"

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WellPoint CEO Angela Braly

WellPoint CEO Angela Braly

Last week, independent analysts in California discovered that WellPoint “overstated future medical costs” to justify its 39% premium increases in the individual health market and committed numerous other methodological errors. The company has since canceled the increases, but the discrepancy has led HHS Secretary Kathleen Sebelius to ask other states to review WellPoint’s increases:

In light of this recent finding, I urge that, to the extent you have authority to do so, you re-examine any WellPoint rate increases in your state to determine whether any mistaken assumptions similar to those made in California were made in your state.  Even small errors can mean unaffordable premiums for policyholders.

I also ask that you review the authority you have under your state law to determine whether you have all of the regulatory tools needed to approve health insurance rates before they take effect.  The ability to require insurers to modify an increase if a proposed rate increase is unjustified has been shown to be effective in many states.  The Affordable Care Act expressly contemplates support for state efforts in rate review, appropriating a total of $250 million to states to assist in meaningful rate review.  We intend to issue guidance on applying for that funding in the near future.

In February, a survey from the Center for American Progress Action Fund found that “double-digit hikes have been implemented or are pending in at least 11 other states among the 14 where WellPoint’s Blue Cross Blue Shield companies are active: California, Colorado, Connecticut, Georgia, Indiana, Maine, Nevada, New Hampshire, New York, Virginia, and Wisconsin.” And the Wall Street Journal reports that New York, Connecticut, and Iowa are taking a second look at the increases and possibly “considering additional action on other companies’ rate increases as well.”

Of course, as some consumer activists have pointed out, given business model, errors like these may be “not an aberration but may be the norm,” suggesting that lawmakers will have to do more than rely on state regulators — whose effectiveness varies from state to state– to prevent insurers from over-charging consumers. If more errors are discovered, Democrats could be in a good position to push through Sen. Dianne Feinstein’s (D-CA) federal rate-review authority.

Update

At the White House blog, Stephanie Cutter also urges states to check on their premium increases.

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