Effect Of Health Bill On Insurance Premiums

California health insurer Anthem Blue Cross' plans to raise premiums by as much as 39 percent in some markets has become a rallying cry for the Obama administration as it aims to increase public support for health overhaul. President Obama's health bill could affect the future rate increases of Anthem and other insurers.

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ROBERT SIEGEL, host:

For more on the debate over raising health insurance premiums and what impact the presidents health overhaul might have on them, were joined now by NPR health policy correspondent Julie Rovner, hi.

JULIE ROVNER: Hi.

SIEGEL: First of all, weve obviously heard lot about this particular company, Anthem Blue Cross, raising its premiums. Are they alone or are other companies doing the same?

ROVNER: No, they have plenty of company. Iowa Republican Senator Chuck Grassley just this week wrote a letter to Wellmark, which is the nonprofit Blue Cross Blue Shield plan that serves Iowa and South Dakota, asking them to justify the 18 percent average increases theyre planning to impose on individuals on April 1st. Anthem Blue Cross in Maine is asking for rate increases over 20 percent, thats on top of a 32 percent rate hike they had last year, and Oregon is also seeing large increases. So, its a pretty wide geographic spread that were seeing around the country.

SIEGEL: Now, as David Welna reported, Anthem's CEO made the case that the company had little choice but to raise its premiums in part because health costs went up last year and in part because healthier people dropped coverage in the struggling economy. It was just an expense they stopped paying. Does that argument make sense?

ROVNER: Yes, it actually does, you know. Anthem has been pilloried, including at the hearing today, because it made a huge profit last year - $2.7 billion in the last quarter alone. But insurance companies keep their lines of insurance separate: large businesses, small businesses and individuals. And thats generally required by state insurance regulators. So, the individual market, which is what were talking about here and which just about everyone agrees is completely dysfunctional, is very, very sensitive to price.

Healthier people drop out when they cant afford coverage because they know they can buy coverage again later when things get better. Sicker people cant afford to drop that coverage, partly because they need it because theyre sick, but partly because if they drop out of the market they wont be able to get back in. But when that insurance pool is only made up of sick people, premiums have to go up because all of them are making claims at the same time.

SIEGEL: Hmm. So, since people have linked these premium increases to the debate over health care and the presidents bill, if his bill were to become law, how would it deal with the situation like this one?

ROVNER: Well, presumably it would make things better. On the one hand, people wouldnt have the option to drop their insurance when the economy goes south because theyd be required to keep insurance. On the other hand, they more likely wouldnt have to do things like that because there'd be a whole new marketplace called an insurance exchange that would merge the current individual market with the small group market which would help moderate premiums overhaul. People would get all kinds of help paying for their premiums, from expanded Medicaid coverage for people with low incomes, to subsidies for those people who are higher up the income scale.

SIEGEL: And as you said, they'll be obliged to be insured under this bill. It would be a mandate.

ROVNER: Thats right. Thats right. There is a mandate.

SIEGEL: You use the word, presumably it would make things better - how might things not get better?

ROVNER: Well, one thing the insurance industry remained very worried about is that the penalties in the various bills that are still on the table are still quite low. That is, if you dont buy insurance youll pay a fee. But in President Obamas plan, for instance, that fee is only $695 in the year 2016, which is presumably still a lot less than you'd pay to actually buy insurance. And if insurers cant discriminate anymore based on a persons health status that could mean you could wait until you got sick to buy insurance, and that remains a big concern for the insurance industry.

SIEGEL: So, if Im healthy with individual insurance and Im having a very rough time making ends meet, I might look at that penalty and say, well, I can afford that a lot better than what Im seeing in the way of premiums.

ROVNER: Thats the concern.

SIEGEL: What is the new federal insurance rate review board that weve heard about this week that the president proposed?

ROVNER: Well, this is something new that the president had put on the table with his plan. It wasnt in the House bill or the Senate bill. Frankly, its really more of a talking point, I think, to help the administration show the public that there are things in this bill for people who already do have insurance. Its not just for the uninsured. That this will help people who have insurance by perhaps letting this board look at high rates like this and keep them from going up. And its also to make the point that if nothing happens, if no bill is passed, perhaps that rates would continue to go up like this for everyone. So this is, as the Congressman said at the hearing, this is another reason why perhaps its important to pass some kind of bill.

SIEGEL: Thank you, Julie.

ROVNER: Youre welcome, Robert.

SIEGEL: NPR health policy correspondent Julie Rovner.

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