Health Plans Have Wait-And-See Approach to Individual Market

Almost as a tip to any health leader interested in exploring the individual health insurance market, Sass said there is much "volatility" in those markets. That's because of a quick and high turnover of members. The result is "the overall risk of the members can increase quickly," Sass wrote, noting a high "churn" rate.

For insurance regulators, Anthem Blue Cross' position is unconscionable. But actually, on the basis of numbers, the company may be justified in seeking the rate hike.

"The rate increase is probably ‘defensible at least actuarially, based upon the actual experience," wrote Bob Laszewski, author of the blog "Health Care Policy and Marketplace Review."

But this isn't about numbers. When Anthem Blue Cross executives dribbled out a response to Sebelius, who slapped it down, the company later agreed with insurance officials in California to postpone the rate hikes from March 1 to May 1 until the investigations are finished.

Not once have I seen this much negative publicity end up with a government agency telling a business in the aftermath: OK, raise the rates. The first mistake that Anthem Blue Cross made was not immediately and dramatically acknowledging the recession, its 800,000 individual customers, the importance of its individual market plan, and make clear the reasons behind this proposed insurance hike in a clear, emphatic, empathetic manner. Instead, it paid PR ping-pong with Sebelius.

Anytime I see a big company make a major PR mistake, I think back to New Brunswick, NJ, where I worked as a young reporter in the 1980s. At that time, healthcare giant Johnson & Johnson performed one of the smoothest, upfront, and certainly difficult PR moves, after the giant pharmaceutical firm discovered Tylenol capsules were found contaminated. Instead of floundering for days wondering what to say or not to say, J & J worked immediately to let people know what went wrong, and what they were going to do about the damage done to their drug. Quickly and honestly. The Tylenol brand was left intact.

As for the individual healthcare market, health planners may wait to see what's ahead for Anthem Blue Cross before they decide to venture into the market, or even consider their own rate hikes. It's one big headache. Take a couple of Tylenols and let's talk in the morning.