Monday, May 3, 2010

Follow-Up on Wellpoint's Proposed Rate Increase: Have Some Pie

Should the Disease Management Care Blog help itself to a heapin' slice of humble pie?

Recall that in a previous post, the DMCB more or less defended California insurer Wellpoint's excessive '39%' premium rate increase for some of its individual policies. Well, the California Department of Insurance brought in a third party to review the actuarial math behind Wellpoint's calculations and they found some alleged mistakes. The impact of aging on trend was "double counted" and the baseline risk factor trend was too high. As a result, Wellpoint has cancelled its premium increases, which means going back to the drawing board.

The DMCB isn't about to let a bad call get buried in its past bloggy archives. Better to tackle it head on and recognize that it made a bad call. It should have known there are two sides to every story.

That being said.....

a) there was nothing actuarial behind the Administration's criticism of Wellpoint during the health reform debate.

b) there's also an old joke that you can take all the actuaries in the world and put them end to end, they still won't reach agreement. One reason why the 3rd party actuarial review of Wellpoint is correct (and if you take the time to read it you'll see how complex this is) is because the California Department of Insurance says it is so.

c) if the DMCB is reading the report correctly, the indicated rate increase for all the Wellpoint products is still a whopping 15.2%. The only good thing about kind of rate increase is that fewer people will find it unaffordable - that is until health reform kicks in. That's when the subsidies will have to kick in and the taxpayers will find it unaffordable.


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