Sunday, March 14, 2010

Wellmark Evil Ripoff?

Because of all the attention being paid to Congress's proposed health care reform, the 18% increase in Wellmark's individual health insurance premiums is getting more attention than it normally would. Is it a big increase? Absolutely. Is it going to hurt? Of course it is. And the final question: why is health insurance expensive? Because it's worth it.

Here's a little background. Effective October 1, 2008, Wellmark revamped its rates and underwriting guidelines. Before that, I wrote very little individual health insurance coverage with Wellmark because of their underwriting. If an applicant had ever been sick or hurt, it seemed like they always wanted to see doctor records, and usually added riders to exclude anything an applicant had ever been treated for in the past. I often had applicants turn down what was offered and take their chances without insurance. Sometimes applicants were turned down for ridiculous reasons. For example, one lady couldn't recall who the doctor was 20 years earlier who had treated her for a minor ankle fracture over 20 years earlier when she lived on the other side of the country. She said he was old enough then that after 20 years he was almost certainly either retired or dead. Because we were not able to get his records regarding her old ankle injury, she was declined for coverage, even though she hadn't required any further treatment since having the cast removed 6 weeks after the accident happened.

When Wellmark revamped its underwriting, I was suddenly able to write business with them because they were being reasonable. For many of the health questions they changed from asking, "Have you EVER" to "In the last five years have you..." or "In the last two years..." or "Are you currently...". Instead of excluding high blood pressure, they figured it into the rates, charging slightly more to the person who showed a history of it being well controlled and charging a lot more for the person who was not controlling it well. In my eyes, it was very fair, and most applicants saw it that way too.

Since October 2008 I have used Wellmark almost exclusively for individual health insurance because they have been easy to work with and have usually had a rate lower than the competition. Even with the increased rates, I will continue to offer Wellmark because I have not been able to find anything better.

The situation with American Community illustrates better than anything else why Wellmark must raise rates. For the past year and a half, when I compared them to Wellmark, they occasionally had lower rates for similar but not equal coverage. When Wellmark announced these rate changes tried to take another look at American Community rates, but I discovered that they are no longer offering individual health insurance in Iowa and A.M. Best dropped their rating to "D" ("poor").

I have been and will continue to check into other companies, but have yet to find anyone who is offering rates significantly lower than the new higher rates than Wellmark's increased rates.

Are the new higher rates an evil ripoff? I don't think so, since the increases are more bringing the rates in line with other companies than anything else. I think what happened is that Wellmark mis-calculated the effect of loosening up their underwriting guidelines and has had to adjust the rates accordingly. Wellmark has postponed the increase pending an investigation from the governor's office. I'll be updating here, but I'll be shocked if the state finds the increases are not justified.