Bleak Economy Pushing Health Insurers to Raise Rates:

Bleak Economy Pushing Health Insurers to Raise Rates:

Insurers in the nation have been subjected to acute attacks of the Obama administration for seeking the rate increases seem surprising that sell policies to individuals.

Health and Human Services Secretary, Kathleen Sebelius recently pounced on WellPoint Anthem Blue Cross unit for wanting to increase premiums by 39 percent in California, and on Thursday released a scathing report detailing increases Wanted digit other insurance companies last year and so far this year.

Angela F. Braly, WellPoint's executive director, was forced to cancel a presentation for investors to prepare the barbecue which is likely to receive before Congress next week on increases in insurance rates.

But as bad as it could play politically, for insurers like WellPoint, the challenging business environment can leave you little choice but to raise prices if they want to protect profits, analysts and some health economists say.

The weak economy and the constantly increasing cost of medical care make it increasingly difficult for firms to avoid substantial increases even if such increases provide fresh fodder for Democrats trying to pass health legislation, now stalled in Congress.



"If they are losing money, have to raise prices," said Charles Boorady, an industry analyst with Citigroup.

Yet the failure to WellPoint seeking increases in the current political climate. He compares it to someone waving a five iron on a golf course during a thunderstorm. "You're asking to be electrocuted."

Under political pressure, the company has said it will delay rate increases in California until at least May 1.

But from a business perspective, WellPoint, one of the largest insurers in the country and the operator of Blue Cross business plans in more than a dozen states, may have little choice as a company accountable to shareholders demanding higher incomes. WellPoint makes money from selling policies for individuals and small businesses is a major source of global revenue. But the company says it lost millions of dollars in California last year on individual policies.

"They are not willing to lose money in this business," said Cathy Schoen, senior vice president of research at the Commonwealth Fund, a research nonprofit in New York. In fact, he said, many companies choose not to sell policies in the individual market.

Many health policy analysts point to the sharp price increase requested by Anthem as evidence that individual insurance is sold in this country must change.

"What they did is actuarially sound and completely legitimate," said Andrew Kurz, a former Wisconsin insurance executive with Blue Cross and Blue Shield, an outspoken critic of the current health system. "It's the market that is not bad, Anthem."

Insurers say they do not agree with Obama's administration if the current laws adequately address what is wrong with the health system. Specific market, especially, the companies say, healthy people tend to choose, leaving sicker people with higher medical costs from insurers to cover. That's a major reason for the insurance industry continues to push for mandatory coverage for everyone.

"Increases in the cost of coverage in the individual market shine a light on the urgent need to reduce the growth of the base medical expenses and to bring everyone into the system," said Karen Ignagni, chief executive of America's Health Insurance Plans, a trade group, said in a statement. "If the reform does not deal with these parts, it will not solve the serious problems that individuals, families and employers are facing."

While WellPoint officials have openly opposed the current health legislation in Washington, said California illustrates the need to change the system. Although California is an important market for WellPoint, the largest insurer in the state, California's economic problems have proved increasingly difficult. As companies have laid off workers, the number of people covered by Anthem in employer plans has declined significantly. Those who seek individual coverage tend to be people they know are likely to have high medical costs.

Although the company would not disclose the exact amount that was in the operating losses in its individual market in California politics, said its medical claims last year were 6 percent higher than they had anticipated, so the company did not charge enough in premiums last year.