WellPoint Inc. (WLP) has planned to cut its proposed increase of premium for individual policy holders in California and will simultaneously delay co-pay and deductible increases.
WellPoint’s Anthem Blue Cross unit in California has reduced its proposed rate increase to an average of 9.1% from the previous proposal to an increase of 16.4%. Further, WellPoint’s new rate increase of 9.1% will go into effect on July 1, from the previously proposed April 1, and it will delay increases in deductible and co-pays until January 1, 2012.
Consequently, the decreased rate hike will save about $40 million, effecting about 600,000 individual and family policyholders in California.
WellPoint has been bearing the burden of unrelenting rise in underlying healthcare costs. The company also believes that the rate increase isn’t enough to cover medical costs and will cause WellPoint to lose money this year on the market for insuring individuals in California. However, WellPoint expects that the rate decision would not impact its 2011 earnings forecast.
WellPoint had lost approximately $110 million on individual health insurance in 2010, after mathematical errors were found in its rate application and it was subject to a lengthy delay in increasing prices. It had originally planned to increase prices in California by up to 39% for some individual policyholders, and ultimately revised that number to an average of 14%.
Likewise during last week, another large insurer, the nonprofit Blue Shield of California, had sliced its plan to increase rates for the remaining year of 2011.
WellPoint’s proposed rate increases in California arise from the spiraling cost of healthcare coverage. Moreover, the new healthcare overhaul law will impose billions of dollars of new taxes on insurance companies. It will guarantee insurance for millions of uncovered Americans and bar insurers from rejecting anyone because of medical conditions.
The effect of the new law remains uncertain because federal officials have yet to determine which expenses will factor into the formulas.
Based in Indianapolis, Indiana, WellPoint, through its subsidiaries, operates as a health benefits company in U.S. It offers various network-based managed care plans to large and small employers, individuals, Medicaid and senior markets. It competes with Aetna Inc. (AET), CIGNA Corporation (CI) and Unitedhealth Group, Inc. (UNH).
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