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Coming Soon to a State Near You

It's not just Anthem Blue Cross in California that wants to pass along huge premium increases to some of its customers. Today the Department of Health and Human Services is releasing a report documenting large rate hikes that Blue Cross affiliates (along with some other insurers) have sought in a half-dozen other states.

Last year in Michigan, for example, the Blue Cross plan asked to raise premiums on some individual policy holders by as much as 59 percent. And you can safely assume the story is not isolated. Earlier this week, I made a round of calls to regulators across the country. Daniel Honey, deputy commissioner for the Life and Health Division in Arkansas, told me his state's Blue Cross plan wanted to jack up some rates by 28 percent. The division ultimately rejected that request, forcing the plan to live with just an 11 percent increase.

That regulatory action wasn't unusual; in Michigan, state officials rejected the Blue Cross request, approving only a smaller 22 percent increase. The problem, of course, is that many state regulators either don't have the authority to take such action or aren't willing to use it. And it goes without saying, or should go without saying, that medical costs for the country as a whole aren't going up by 22 percent, let alone 56.

The problem here, as the Blue Cross plans themselves have admitted, is the dysfunctional nature of the individual insurance market. Insurers divide the market up into blocks, then adjust rates to account for the past and projected medical expenses of each block. As the rates go up, healthier beneficiaries leave the block for other policy options, forcing rates even higher for those people who are left.

The problem gets worse when the economy is bad, because people are more eager to find cheaper coverage and more willing to risk going without. It can also get worse if an insurer is trying, deliberately, to isolate and then force out unhealthy subscribers.

How do you stop this cycle? Get everybody covered, either in one pool or a set of smaller pools that are "risk-adjusted" so that this cycle doesn't take place. But to do that, you have to require that insurers stop discriminating against people with pre-existing conditions, mandate all policies provide average coverage, make everybody carry some insurance, provide subsidies for people who can't afford premiums on their own, and implement systemic reforms that will make medical care itself less expensive over time.

In short, you have to pass health care reform.