Reject Anthem rate increases?

The struggle over the savings offset payment to fund Dirigo Health, with the superintendent of insurance finding that Dirigo saved $44 million in its first year of operation, may have distracted attention from an equally important public hearing today.

Individual policies are among only a few health insurance plans with state-reviewed rates, so the hearing provides a unique window on Anthem’s overall policies. Like the savings offset payment (SOP) debate, what we see is far from reassuring for health care consumers.

Anthem’s requested increases are eye-popping – and dismaying. This out-of-state insurance giant wants to raise individual policy rates from about 10 percent to as much as 36 percent, with an average of nearly 20 percent. And these are on top of an average 14 percent increase last year. If approved, the increases would take effect Jan. 1, just seven weeks later.

As intervenors in the savings offset payment case, Consumers for Affordable Health Care learned a great deal about insurance company practices. And what we learned leads us believe that affordable rates are very low on the priority list for companies like Anthem.

In the individual rate case, subscribers have received what can only be called a cursory explanation for these enormous increases. They were told that rates charged by providers have increased faster than inflation over the last four years. But there is no information about increases since Dirigo Health took effect, when providers have voluntarily contained increases.

As Anthem’s own director of provider network management, Daniel McCormack, testified in the SOP case, “Some hospitals have actually reduced their charges for defined periods of time to remain below the voluntary caps – most notably Maine Medical Center and Eastern Maine Medical Center,” the state’s two largest hospitals. Yet these reduced charges were not reflected in Anthem’s position on the SOP or in the pending individual rate case. Before the superintendent had even determined the amount Dirigo had saved, Anthem was already telling subscribers it planned to add the SOP as a surcharge on rates, rather than negotiating with providers to realize these savings, as required by law.

Insurers are now trying to suggest that they can’t realize the savings generated by providers because they have “little leverage.” This would seem to fly in the face of the reality that Maine has 39 community hospitals, and one insurer with the bulk of the insurance business. As Mary Mayhew of the Maine Hospital Association put it, “To

have the insurance industry blame us is simply irrational.”

The other explanation Anthem offers is that subscribers are using more health care services than four years ago, and this is where things really get interesting. For the highest rate increases – well over 20 percent – are reserved for Anthem’s $15,000 deductible policies, insurance that can only be described as “catastrophic coverage,” useful in only the most dire illnesses or accidents.

If the problem is increased use of services, how can it be that the biggest increases are imposed on those who are least likely to use services paid by Anthem? Very few families, fortunately, are likely to use more than $15,000 in services a year, with the result that Anthem has few claims to pay. Also, if usage has increased so much, why doesn’t Anthem get involved in state hearings to challenge applications by large hospitals to construct new buildings or buy expensive equipment that duplicates what is already available?

Even those who can’t afford the full-service insurance policies that provide the best access to health care still try to gain some protection through high-deductible policies. The conclusion seems inescapable that Anthem, which is the only major provider of individual policies in Maine, is charging what the market will bear, rather than covering its actual costs.

Through its acquisition of Wellpoint in California, Anthem has become one of the largest providers of health insurance in the nation. Its CEO, Larry Glasscock, recently received a $42 million bonus for engineering the Wellpoint merger. And its profits have soared.

Anthem’s Maine operations now bear little relationship to the former Maine Blue Cross and Blue Shield, which it purchased in 1999 and converted to for-profit status. In 2004, it earned almost $20 million in after-tax profits from its Maine operations alone.

While containing health care costs has been a difficult and complex task across

the country, there is mounting evidence that Anthem is part of the problem, not part of

the solution, in Maine. An insurer that can’t, or won’t, negotiate better rates for its customers is just not doing its job.

We hope the superintendent of insurance will provide the same scrutiny to the individual rate case that he did in requiring the Dirigo Health board to document the savings achieved by Dirigo. Unless Anthem has a whole lot better explanation for the monumental rate in-creases it once again wants Maine customers to pay, the increases should be rejected, and Anthem sent back to the drawing board.

Joe Ditre is executive director of Consumers for Affordable Health Care.