By Chad Terhune
September
20, 2017
Health insurance giant Anthem predicts
Californians will pop a lot more pills next year.
To make the case for a
hefty premium hike in the state’s individual insurance market, Anthem Blue
Cross has forecast a 30 percent jump in
prescription drug costs for 2018. Such a sharp increase is nearly double the
estimates of two other big insurers, and it runs counter to industry trends
nationally.
Prescription drug
spending in the U.S. grew 6.1 percent over the 12 months ending in July,
according to Altarum, a nonprofit
think tank. That’s down from 12.9 percent in 2014, when expensive new hepatitis
C drugs sharply lifted overall pharmaceutical spending.
“I can’t understand
why Anthem is predicting 30 percent,” said Charles Roehrig, a health economist
and founding director of Altarum’s Center for Sustainable Health Spending.
“There are examples of egregious price increases for particular drugs that have
gotten a lot of well-deserved attention. But those haven’t characterized what’s
happening as a whole,” he added.
The advocacy group
Consumers Union also questioned whyAnthem’s
cost projections are so much higher than its competitors, and it has asked
state regulators to demand additional documentation from the nation’s
second-largest health insurer.
Overall, Anthem is
proposing a 35 percent rate increase for about 135,000 consumers who buy their
own insurance in and outside the Covered California exchange. It’s the largest
increase statewide and assumes that federal subsidies for copays and
deductibles will continue to be paid. The second highest, also assuming the
U.S. government will continue paying those subsidies, is 28.6 percent by Molina
Healthcare.
Some of Anthem’s
rivals aren’t as pessimistic on the outlook for drug costs. Two other large
insurers, Blue Shield of California and Health Net, projected drug costs will
rise by 16.4 and 15 percent, respectively. Anthem came in even lower than
that in its rate filing for Colorado’s individual market, projecting an 11.4
percent increase in prescription drug costs.
The company said it
stands by its California cost projections in light of growing market
volatility. In documents filed with regulators, the company expressed concern
that declining enrollment in the individual market would saddle it with a
sicker group of policyholders.
“As it pertains to
pharmacy, our rates reflect the increasing utilization and rising cost of
prescription drugs we have experienced in this market over the last couple of
years,” said company spokesman Colin Manning.
In fact, Anthem
emphasizes rising drug utilization over higher drug prices when justifying its
rate increase — an argument Consumers Union challenged as unusual. Most other
insurers in California have cited rising prices as a bigger factor in filings
to state regulators.
“Anthem projects an
extraordinary increase in its enrollees’ use of prescription drugs at four or
more times the rate of enrollees at other carriers,” said Dena Mendelsohn, a
staff attorney for Consumers Union in San Francisco.
The California
Department of Managed Health Care said it is scrutinizing Anthem’s “underlying
medical costs and trends” as part of its review of 2018 rate increases. The
state agency, which expects to finish its review next month, can pressure
insurers to reduce their rates, but it doesn’t have the authority to block
them.
“We may ask [Anthem]
questions and for additional information to support the plan’s proposed rate
change,” said Rodger Butler, a spokesman for the Department of Managed Health
Care.
Anthem is significantly
curtailing its presence in Obamacare marketplaces nationally next
year amid ongoing uncertainty from the Trump administration and Congress
over whether they will continue the federal subsidies that lower out-of-pocket
costs for low-income consumers.
In August, Anthem
announced a partial withdrawal from
California’s individual market, saying it will sell policies in only about half
of the state’s counties.
Anthem’s chief
executive, Joseph Swedish, told
investors and analysts at a conference this month that the company may re-enter
certain ACA markets across the country if Congress and the White House
take steps to stabilize them.
Some experts wonder if
Anthem made a mistake in its California rate filing. It wouldn’t be the first
time.
In 2010, an outside
actuary working for California regulators found a critical error in
Anthem’s proposal to raise rates by up to 39 percent. President Barack Obama
seized on the public outcry over that double-digit increase to help get the
Affordable Care Act passed in Congress. Anthem later withdrew the increase
after David Axene, an actuary in Murrieta, Calif., discovered problems with the
company’s calculations.
Axene said this latest
filing for 2018 health plans raises plenty of questions.
The pharmacy estimate
“does seem high,” he said. “It’s a more mature marketplace now, so hopefully
everybody knows how to price it. But I’m sure stupid mistakes still happen.”
Chad Terhune: cterhune@kff.org,
@chadterhune
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