Tell Me It Ain't So, Shoeless Joe Actuary

Unless you've been living in a cave the last few months, you probably have heard about a large rate increase Wellpoint (doing business under the "Anthem" name) had proposed for their Individual Health Insurance policies in California.

After several nationally televised presidential finger waggings, Wellpoint and California's Insurance Commissioner (none other than Governor's office hopeful Steve Poizner) agreed to engage a third party to review the actuarial justification for the increases. Dave Axene of Axene Health Partners was engaged.

The results of the review are best summed up in this USA Today Headline: Oops! .

The review determined the actuarial calculations used by Wellpoint to justify the rate increase introduced several errors that in total resulted in average increases about 10% higher than actuarially justified.

Prior to the release of the report, Anthem (really Wellpoint) announced that it is removing the rate increases, and will come back in a month or so with something that might be more coherent. Anthem's mouthpiece claimed that the overstuffed rate increase was due to "mathematical error".

In other words, we are asked to believe this was simply an honest mistake. Certainly an esteemed and universally loved corporation would not file excessive rates with the hope that their screwy math underlying the rates would never be scrutinized.

There is no way of knowing how these "errors", which would have conveniently worked to lard up premiums and Wellpoint's treasury by millions, occured. Given no other evidence, I must presume this is an honest mistake made by well meaning actuaries. It is very hard to believe that.

Please, Shoeless Joe Actuary, please tell me it ain't so.

Wellpoint employs over 160 accredited actuaries. It would be unusual for a high exposure (i. e., big enough to raise public anger) rate increase to be proposed without several levels of peer review. I fail to see how this could have happened.

Poizner reports "state officials immediately suspected Anthem's original proposal was inaccurate, but company officials insisted it was not. However, the company agreed to the independent evaluation by outside experts". It seems unbelievably stupid that someone wouldn't have taken a close look at this mess, knowing that in short time, all would be revealed.

This doesn't smell so good.

That's my story and I'm sticking to it.