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Will the White House demand that every business “justify” its price increases?

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By Michelle Malkin  •  February 9, 2010 11:31 AM

Demcare is in critical condition and the White House thinks it has the prescription for revival:

Insurer-bashing demagoguery.

There is now a coordinated effort underway to demonize Anthem Blue Cross in California for raising rates. Obama singled the company out in a 60 Minutes interview over the weekend and HHS Secretary Kathleen Sebelius is playing dutiful attack dog, demanding that Anthem “justify” its rate hikes to the federal government:

The Obama administration and state insurance officials pressured Anthem Blue Cross on Monday to justify its decision to raise rates by as much as 39 percent for thousands of outraged and frustrated California customers.

U.S. Health and Human Services Secretary Kathleen Sebelius asked Anthem to explain its “extraordinary” premium increases for its individual policyholders.

Meanwhile, the state Department of Insurance demanded that Anthem delay its rate increases until May 1 to give the state time to investigate. Insurance Commissioner Steve Poizner said last week that he plans to hire an outside actuarial firm to make sure Anthem is spending at least 70 cents of each premium dollar on benefits.

The Obama administration and Poizner’s office were prompted to act after Anthem members with individual policies – those who are not covered through employer-sponsored or group plans – were told last week that they would have to pay premiums up to 39 percent higher than their current rates. The Woodland Hills (Los Angeles County) company would not say how many people will be affected, but Anthem has as many as 800,000 individual policyholders – more than any other for-profit insurer – in the state.

President Obama appears to be using Anthem’s decision to increase rates to bolster efforts to revive the stalled health overhaul effort in Congress. In a CBS interview with Katie Couric on Sunday, Obama referred to Anthem’s hikes as a reason why reform is needed.

On Monday, Sebelius told the health insurer’s president, Leslie Margolin, that Anthem has a responsibility to explain the increases, especially at a time when its parent company, WellPoint Inc., is earning strong profits. “These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy,” Sebelius wrote, adding that WellPoint earned $2.7 billion in the last quarter of 2009 alone.

…Health insurers in California can raise rates for policyholders as much as they want and whenever they want. State regulators can oversee the increases to make sure they are handled correctly under the law, but have no power to control the rates.

Anthem, for its part, said higher medical costs as well as a smaller pool of members to absorb the risk made raising rates necessary.

“Unfortunately, in the weak economy many people who do not have health conditions are forgoing buying insurance,” the company wrote in a statement Monday responding to Sebelius’ letter. “This leaves fewer people, often with significantly greater medical needs, in the insured pool. We regret the impact this has on our members.”

A private company trying to survive in the marketplace must now “explain” itself to federal bureaucrats and career politicians who have never run a business (successful or otherwise) in their lives.

We already have a federal pay czar requiring companies to justify their pay raises and claiming authority to claw back bonuses already paid.

Will the White House next demand that other businesses — not just health insurers — justify price increases deemed unreasonable, excessive, or “extraordinary?”

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Commenter jrlinggreenbay: “Oh, if only we were privy to the true administrative costs of our own government’s programs…”

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A good point:

…the underlying logic of [Sebelius's] demands is peculiar: Health care costs are going up rapidly—something everyone acknowledges, including Sebelius in the letter—but the people who provide health insurance should continue to behave as if they are staying the same, or perhaps only rising at the rate of inflation?

Sebelius also suggests that the people “deserve to know” if the rate increases will be spent disproportionately on administrative costs. But that level of disclosure—while appropriate for government-supplied health insurance, like Medicare or Medicaid—isn’t mandatory for private firms, and shouldn’t be. The secretary of health and human services doesn’t demand public disclosure measures when the cost of Tylenol goes up. This should be no different. But Sebelius’ letter is just as sign of the times on the health care issue, with the boundaries between public and private eroding increasingly rapidly.

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Read Steve McGough:

I completely understand the feelings involved here, but you have to wonder and be willing to research increased costs at the health care delivery point (physicians and other health care providers), government required mandates that vary from state to state. If you’re running a company like WellPoint, you don’t just blindly pick a high premium increase and go with it.

WellPoint Inc. – parent company of Anthem Blue Cross in California – has a respectable 7.3 percent net profit margin for the most recent reported year, but a more impressive 14.4 percent net profit margin for the most recent quarter.

Are you willing to do the work to research why Anthem wants the rate increase? Are executives at Anthem willing to step up and detail the issues and why they need the increase in premiums?

By the way, what would you say if a health insurance company was a non-profit and requested a 25 percent increase in premiums? You think it would never happen?

Are you one that think the anti-trust exemption for the insurance industry is unfair? If so, are you willing to research the reason why many health insurance premiums – with the same benefits in the same area – are virtually the same? Maybe it has to do with actuarial math? Willing to check that out?

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