Trust But Verify: WellPoint Announces It Will Conduct Third-Party Review Of Premium Increases

Responding to Kathleen Sebelius’ call on states to review proposed premium increases, WellPoint has announced that it “will conduct a third-party review of all its individual market 2010 rate filings.” The move comes just days after 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.

“We have to be sure that the processes we use and the work we produce are reliable and accurate, so they do not in any way distract from the real challenges facing us—the unrelenting increase in the cost of health care in America,” CEO Angela Braly wrote in a memo to staff.

This is an important first step, but lawmakers have to ensure that the third-party review is a legitimate and independent third-party, not a company hired and paid for by WellPoint. As Sen. Tom Harkin (D-IA) recalled during a recent committee hearing, reviewers seldom embarrass the hand that feeds them:

HARKIN: You mentioned they were found justified after an independent review….The independent review was done by INS…’They found the insurance rate review process acceptable and reasonable, using INS’s methodology.’ But as was pointed out in a newspaper article, it said that, ‘While INS is technically independent, there is no way the firm would contradict and embarrass the agency that hired the firm.’ So it’s the companies that hire the firm to do the independent review. ‘If INS were to contradict the insurance division, it would likely not be hired in the future by the INS insurance division or any other insurance regulator.’ So, you wonder about that independence. I wonder about that myself in terms of these rate reviews.

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In other words, state regulators will have to check WellPoint’s math. And, as long as the process is transparent, the review will carry far more legitimacy.