HEALTH CARE/Joan Retsinas

Math Troubles at WellPoint

My goodness! Arithmetic is so confusing, so hard. Or maybe the problem is that we’re trained in new math, have forgotten the old math. But the numbers are just so complicated; the formulas so confusing. How can anybody, let alone an actuary, stay on top of all those zeros and commas?

And what about those ridiculously hard standards for “accuracy”? Does anybody expect total accuracy? Are anybody’s numbers really truly accurate? All the time? Get real. If the numbers are more or less OK most of the time, that should be fine. Nobody gets 100% of everything correct all the time. That is why teachers grade along a normal curve. Don’t those pesky state regulators breathing down my neck know about normal curves? Even fifth-graders who got As in arithmetic made mistakes. Some of us made lots of mistakes. And still passed. Don’t those regulators know about social promotions?

At WellPoint it is time for remedial math. Apparently the ones who add up expenses – what the insurer paid out — got tangled up in numbers.

California’s WellPoint this past year saw — my gosh — that costs had soared, compared to revenue. Costs are supposed to equal revenues (building in a hefty X that constitutes profits). To make that equation work, premiums just had to rise by 39%. No choice. The numbers talked.

So WellPoint made their case to the California regulators: Please let us raise premiums. We have no choice. Insurance honchos pointed to the numbers. Numbers don’t lie.

California is a huge state, and a 39% hike is huge. In February at a hearing before Congress, held to probe this huge hike, a WellPoint executive pointed to the usual suspects: rapacious hospitals, doctors and drug companies. The insurer was simply passing on their increases. No choice.

Most state regulators are overworked. In California, which has the kind of fiscal troubles that WellPoint couldn’t even imagine, it is both wonderful and surprising that there were enough staff to look over the request, carefully. But a hike in premiums translates to a major burden on California residents, so the regulators looked very carefully at those calculations.

They found a gaffe — a “miscalculation” in the words of WellPoint personnel. The insuror’s numbers-people had added up the numbers incorrectly, to WellPoint’s advantage. The company didn’t need a sharp hike in premiums after all. (“WellPoint to Beef Up Rate Reviews,” Wall Street Journal, May 5, 2010.)

Right now in the power-chambers of WellPoint I suspect that executives are looking for the glitch. A computer error? Maybe software inadvertently programmed to overstate costs? To double-count? Or maybe the fault lay with a hapless entry-level data clerk, still cramming for the math part of the GED. Whatever and whoever the culprit, WellPoint is very very sorry.

Kathleen Sebelius, director of the federal Department of Health and Human Services, has urged state regulators to examine WellPoint’s requests for rate increases. (Connecticut recently granted a 20% rate increase, against a requested 25% increase; New York granted a 17% increase.) Maybe just maybe the math is wrong.

Across the nation, whenever a private insurer goes before a state regulatory body to plead for higher rates, I hope those states’ regulators take out their calculators and re-do the math. A normal curve of accuracy won’t work – especially when that normal curve is skewed to the company’s benefit. The bottom line (literally and figuratively) should be protecting the public.

Joan Retsinas is a sociologist who writes about health care in Providence, R.I. Email

From The Progressive Populist, June 15, 2010

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