Friday, April 23, 2010

Heads You Lose, Tails You Lose

Even though we have been focusing on the battle of rates in Massachusetts, there is a similar war going on on Maine between the DOI and Anthem Blue Cross.

While many know Maine for their lobsters, that tiny state is also the home of high health insurance rates. It has nothing to do with the climate but rather the state legislature that decided years ago they wanted to make health insurance available to anyone, regardless of any pre-existing medical condition.

So they proceeded to place restrictive mandates on plans that could be offered to the populace.

The result was a mass exodus of carriers which essentially left the market pretty much to Anthem Blue Cross and a handful of HMO's.

Premium rates shot up almost overnight and the number of plans available to consumers dropped dramatically to only a handful of plans.

Does any of this sound familiar?

To counter rising premiums the state created Dirigo which has since gone bust a couple of times due to lack of taxpayer funding. The idea of Dirigo was to provide a taxpayer subsidized plan to help pay for coverage for the states 130,000 without insurance.

Currently there are only 8300 on the plan and it is closed to new applicants.

Care to guess why these type of plans never seem to work?

But back to Anthem vs. the Maine DOI . . .

A few months back, Blue Cross ask for a rate increase which was denied. The justification was, even though Blue Cross had slim margins on their individual major medical business in Maine, the parent company (that would be Anthem) made money so the requested increase was denied.

This is like telling Ford they have to keep selling Pinto's, even though they lose money on every one, because as a whole the company made money.

Just because the government doesn't have to bring in enough revenue to cover their marker doesn't mean businesses can do likewise.

Blue protested and went to court. Here is what the courts have said.

The Maine Superior Court has affirmed a decision by state regulators to cut the increase in Anthem Blue Cross and Blue Shield of Maine’s rates for individual health plans from 18.1 percent to 10.9 percent.

Superior Court Chief Justice Thomas Humphrey said in a ruling Wednesday that Maine law does not “expressly entitle insurers to a mandated profit margin.’’

That was a silly ruling.

Of course companies (of any flavor) are not GUARANTEED a profit. All they want is a CHANCE to make a profit.

The company has not decided whether it will appeal the ruling.

“That said, we stand by our position that filed rates need to both cover the medical costs for our members and allow for an adequate risk margin to cover unanticipated costs,’’ said spokesman Christopher Dugan

Regardless of what happens, the consumer will lose.

Blue will agree to write business at the lower rate and be forced to take other action such as restricting benefits on new applicants, or they could pass on the rate hike on renewals but leave new business rates in compliance.

The other thing Blue can do is decide to leave the state. In that same vein they can stop offering individual major med business and concentrate on other lines (such as group) that is potentially more profitable.

Regardless of what Blue does, the consumer will ultimately lose.

This scenario will play out on a national scale as well as Obamacare rolls out.
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