Response from Anthem Blue Cross:
fast custom essay writing serviceThe rate increases in the small group market are not unique to Anthem Blue Cross Life and Health Insurance Company (“Anthem”), but rather represent an economic reality faced throughout the entire industry as healt
h care costs continue to escalate faster than our state’s economy as a whole. In an effort to offer the most affordable health care coverage possible, we have reduced our estimate of 2013 medical cost trend to its lowest levels in years and are raising premiums an annual average of just 6.5 percent. This increase is lower than what one of our non-profit competitors have filed for.
We are a heavily regulated industry, and our profit on this portion of this business was just 1.2 percent in 2012. Under the law, Anthem must spend the vast majority of what we charge in premiums to pay medical claims. In the unlikely event our estimates of medical costs are not accurate, refunds are given to our customers.
• Over 24 months, the average increase, including benefit changes, is approximately 13 percent.
• The medical loss ratio (percent of premiums spent on medical benefits) for this filing is forecast to be above the federally-mandated minimum of 80 percent.
• The profit on the portion of Anthem’s Small Group business regulated by the Department of Insurance in 2012
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is projected to be just 1.2 percent. Compare this to pharmaceutical profit margins of at least 13 percent, or Medical Device & Equipment
Manufacturers which average approximately 16 percent.
• Anthem’s Small Group administrative costs are far below our competitors. For example, our administrative costs are roughly half that of our closest competitors based on their recent filings.
• Anthem’s rate change at 6.5 percent is at the low end for any major player in the small group market for rate changes going into effect in the first quarter of 2013 (among insurers with more than 40,000 members and according to the Department of Insurance Web site, accessed 12/31/2012). In fact, another large health plan filed for a 9.7 percent increase for approximately 250,000 members.
• For this filing, the ACA fees account for approximately 75 cents per person per month, or $9 per year.
Return on Equity vs. Profit:
Return on Equity is NOT the same as profit. Generally speaking, profit is defined as revenue minus expenditures. Return on equity is a measure of efficiency, but they are not the same or even similar. To use a football analogy, profit could be considered similar to the final score of the game. Return on equity could be considered how many passing yards a team had. They are both statistics relating to the game, but they are
• According to the California Health Care Foundation, Anthem had a profit of approximately 4 percent in 2010, the most recent report available.
• Our parent company’s profit margin was approximately 4.5 percent