WellPoint Inc., one of the nation’s top five private health insurers, is looking for loopholes and play corporate games to keep corporate profits high, a consumer group charges.
The group, Consumer Watchdog, is calling for the Obama administration to launch an investigation of WellPoint, which is the parent firm of Anthem Blue Cross, a California insurer that recently sought to jack up rates nearly 40 percent even in the face of soaring profits. That increase raised the ire of California state officials, as well as federal lawmakers, both from California and beyond.
Consumer Watchdog cites a message to investors sent via Dow Jones newswires as describing how it would simply re-label administrative costs as “medical care” in response to the new health reform law.
“WellPoint keeps proving that it will sniff for every loophole and play every game to keep profits high without becoming more efficient or helping control overall medical costs,” says Jerry Flanagan, medical policy director of Consumer Watchdog, which strongly backed federal healthcare reform legislation, including public-option provisions that were not included in the final law that President Obama signed last week. “This manipulation of how the insurer defines medical costs is what we predicted would happen, but it’s surprising that WellPoint acted so swiftly. The Department of Health and Human Services hasn’t even issued its definitions of what constitutes a medical expenditure.”
In a statement, Consumer Watchdog quotes the message to WellPoint investors sent March 17 via Dow Jones as saying:
“WellPoint’s (WLP) medical cost ratio should rise and its overhead-expense ratio decline this year as the insurer reclassifies various types of costs. Disease management, medical management and a nurse hotline, for example, ‘are being reclassified because they represent additional benefits provided to our members,’ a representative says. They’ll now be part of the medical cost ratio, the percentage of premium revenue used to pay members’ health-care costs. These are claims-related costs incurred to improve member health and medical outcomes, WLP says. Accounting rules allow the changes, which better align MCR with anticipated health reform guidelines, Stifel Nicolaus says.”
The new healthcare reform law requires insurers spend at least 80 percent of customers’ premiums on medical care in the individual insurance market, and 85 percent in the employer/group market.
Consumer Watchdog says that it predicts WellPoint will lobby for definitions that exactly match the company’s revised idea of what constitutes medical care.
“The addition of ‘medical management’ — a grab bag that may include purely administrative units whose job is to deny as much expensive care as possible, and may include doctor billing — shows Blue Cross’s intent to relabel first and defend it later,” says Flanagan.
Consumer Watchdog charges that WellPoint has played games before, citing an email obtained by a congressional committee earlier this year showing company executives adding an extra 5 percent to those proposed premium increases in California, so it could turn around and “offer” a 5 percent reduction just if regulators protested.
In a letter earlier this month to California Insurance Commissioner Steve Poizner, Consumer Watchdog also accused WellPoint of laundering profits through other WellPoint subsidiaries and sending excess amounts to the parent company.
Consumer Watchdog says it is calling for the Department of Health and Human Services to investigate WellPoint’s reclassification of services, particularly the undefined “medical management” category and nurse hotlines, which could include the enforcer-nurses who conduct utilization reviews aimed at reducing the utilization of medical care.
The publisher of the news site On The Hill, Scott Nance has covered Congress and the federal government for more than a decade.