New Haven Independent

According to the New Math promoted this week by the president of Anthem Blue Cross & Blue Shield, adding tens of thousands of people to a health insurance plan drives up the cost — in this case by luring a less healthy mix.

According to conventional math, adding more people to a plan drives down costs by spreading risk and commanding a more competitive price from insurers.

Politicians and labor leaders affirmed the conventional math as they made their appeal at a press conference at New Haven’s City Hall. They accused Anthem of devising a specious last-minute argument to try to protect its profits by killing a bill that will offer relief to health insurance-plagued employers and thousands of families.

“When you have a large pool you are able to get lower rates,” said Mayor John DeStefano pictured with New Haven State Rep. Toni Walker.

Wednesday’s event at New Haven City Hall was one of several across Connecticut this week as Connecticut’s big health-care reform fight of 2008 comes to a head. (Click here and here to read Christine Stuart’s accounts of others.)

On one side of the battle: Small businesses, not-for-profits, unions, and cities and towns struggling with ever-increasing health insurance premiums. They support the Connecticut Healthcare Partnership Bill passed this state legislative session. The bill, a first step toward universal health care, would open the state employee health care plan to municipal governments as well as small businesses and not-for-profit agencies. The idea is to cut those groups’ health care costs by creating the largest possible pool of people. The state plan already covers around 200,000 people. Its premiums were scheduled not to rise at all this coming year — while smaller employers face up to double-digit percentage increases.

On the other side of the battle: Health insurers like Anthem Blue Cross Blue Shield, which could lose leverage to charge higher rates if they have to compete for ever-larger pools of customers; and the Connecticut Business & Industry Association, which could lose customers for its own health-insurance plan if the bill passes. (Click here for a story in which the CBIA makes its case against the bill on consumer grounds.)

At the center of the battle: Gov. M. Jodi Rell. She has to decide whether to sign or veto the bill. It would be difficult to must enough votes in the State Senate to override a veto should she issue one.

Rell spokesman Rich Harris said the governor has no timetable yet for a decision. He noted that the bill hasn’t formally arrived on her desk yet; when it does, she has another 15 days to take action.

How’s she leaning?

“I don’t know that she is leaning,” Harris said Wednesday. “There are an awful lot of tea leaves that have been read. She makes it a practice of not making up her mind on anything until she has a chance to really look at a bill and give it a close read.”

However, Rell has said that the state’s new fiscal reality will factor into all her bill-signing decisions. Wednesday the state announced that the current fiscal year’s deficit has climbed to $52.9 million; next year’s deficit is now projected at $150 million.

“The governor is concerned about losing $54 million in savings achieved in the current contract for the state employees’ health plan, said another one of her spokesmen, Chris Cooper. “It is clear that the $54 million, if not lost, would be jeopardy. In this fiscal climate it certainly does present concern. That’s $54 million the state does not have right now.”

Which is why the fate of the health-pooling bill could depend on Aetna’s newly issued New Math, and the arguments being made against it this week.

“Adversity In Mix”

The New Math disupte began with a May 16 letter to the governor from Anthem President David R. Fusco.

Fusco wrote that Anthem would have to raise its rates for the state plan by 4 percent, or $24 million, if the law passes. The letter cites, without details, “actuarial calculations” that assume “an adversity in mix and utilization” — in other words, a widened pool would include more people with health problems. Proponents of the law claim that, in fact, it’s the state employee pool that is older, and less healthy, than the general population.

Click here to read the full text of the letter.

“We have not been able to validate the numbers Fusco is throwing at us” at the last minute, State Rep. Walker responded at Wednesday’s press conference. “Twenty-three other states have a pooling process [like the one in the Connecticut bill]. We’re not trying to do anything new.”

“There’s a group of people trying to make a case … to protect an industry,” state AFL-CIO President John Olsen [pictured] said at the news conference. “The timing of it is questionable. … This [bill] is the free market working!”

Mayor DeStefano argued that while he seriously doubts Anthem’s math, it would still make financial sense to pass the bill even if Anthem’s math proved sound. Any money spent on the front end to launch the larger insurance pool would save lots more money “on the back end” for local governments and other employers, he said. That would help preserve and create jobs and grow the economy.

New Haven State Rep. Robert Megna sits on the legislature’s Insurance Committee. He said he never heard Anthem make this argument during the months that bill was under consideration.

“Where was this letter the day this bell went through the legislature?” he asked at the press conference.

Anthem did make this case in repeated meetings with legislators during the session, Anthem spokeswoman Sarah Yeager said Wednesday afternoon. “”We’ve had multiple meetings with elected officials about this… We did not wait until the last minute. It was very transparent from the beginning.”

Yeager said Anthem’s math is based on the fact that employers would join the new pool because they’re “looking to save costs.” That means they would pay less under the new plan than they currently pay. That suggests their health insurance is costlier, she argued.

“The people who will look at this plan are people whose current health care plan is more expensive,” she said. “If people are looking at the plan and seeing at something as more cost-effective for them, there’s a reason.”

Could the reason be, as suggested by the bill’s proponents, that those people are currently in too small a pool to command a better price?

“It’s not that simple,” Yeager responded.”the assumption is that those groups are paying more because they have a greater risk.”

“Proof Of The Power”?

“New Haven is proof of the power of the pool. New Haven insures 14,000 lives. We have been able to accomplish much of the savings that occur in this bill,” Mayor DeStefano said at the City Hall press conference.

Ironically, New Haven itself probably would not join the new pool if the bill passes.

Originally the bill’s main sponsor, State Rep. Chris Donovan, said the bill would save New Haven millions of dollars in health insurance costs for its employees.

When New Haven crunched the numbers, it discovered it had already attained the savings the bill would produce, and wouldn’t save any money under the bill’s plan, according to city Chief of Staff Sean Matteson.

The reason for the different numbers? Donovan’s original estimate was based on figures compiled by the legislature’s Office of Fiscal Analysis (OFA). Matteson said that when it was compiling those figures, OFA had asked the city how much city employees pay for health insurance. It didn’t ask how much the city pays in administrative costs, Matteson said.

With 14,000 “lives” in its plan, including 2,500 retirees, New Haven already has the second-largest pool of insured employees in the state, Matteson said.

So why was New Haven Wednesday joining the call to pass the Healthcare Partnership Bill?

Because “it’s a great plan,” Matteson said. And even though it wouldn’t save New Haven money, it would save money for many smaller communities, he said, not to mention small businesses and not-for-profits.