Obama official ‘very disturbed’ by Anthem Blue Cross rate hikes
California insurance regulators asked Anthem Blue Cross to delay controversial rate increases of as much as 39% for individual policies, hikes that have triggered widespread criticism from subscribers and brokers -- and now from the federal government.
In a rare step, the Obama administration called on California’s largest for-profit insurer to justify its rate hikes, saying the increases were alarming at a time when subscribers face skyrocketing healthcare costs.
In a letter to Anthem’s president, Health and Human Services Secretary Kathleen Sebelius voiced serious concern over the higher premiums, which go into effect March 1 for many of the insurer’s estimated 800,000 individual policyholders.
“With so many families already affected by rising costs, I was very disturbed to learn through media accounts that Anthem Blue Cross plans to raise premiums for its California customers by as much as 39%,” Sebelius wrote to company President Leslie Margolin.
“These extraordinary increases are up to 15 times faster than inflation and threaten to make healthcare unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy.”
Woodland Hills-based Anthem said it would respond to Sebelius’ request as soon as possible.
California Insurance Commissioner Steve Poizner asked Anthem’s parent company, Indianapolis-based WellPoint Inc., to delay its rate increases until May 1 while an independent actuary, appointed by the state, could review them.
Poizner said in his letter to WellPoint’s chief executive and chairman that he would stop Anthem’s rate increases if the actuary determines that the insurer spends less than 70% of its premiums on benefits, as required by state law.
“The premium increases Anthem proposes for critically needed individual health insurance could have a devastating financial impact on hundreds of thousands of its policyholders in California,” Poizner wrote. “The Department [of Insurance] has received numerous complaints from irate Californians describing how Anthem’s proposed rate increases would cripple them financially.”
A WellPoint spokeswoman said she couldn’t immediately respond to questions about the company’s reaction to Poizner’s request.
An Anthem spokeswoman said the company was reviewing Poizner’s letter and did not have a reply Monday.
Anthem said its costs have been driven up in part because the weak economy has led many people in good health to forgo coverage, leaving those with greater medical needs in its pool of customers.
“We regret the impact this has on our members,” it said of its rate hikes. “It highlights why we need sustainable healthcare reform to manage the steadily rising costs of hospitals, drugs and doctors. As such, it is important to go back to the beginning and get healthcare reform done right.”
Anthem has declined to say how high it would raise rates or how many people would be affected. But brokers who sell these policies said the increases were many and large. They said they were fielding numerous calls from customers angry over premium increases of 30% to 39%, after similar ones just last year.
Many policyholders say the rate hikes are the largest they can remember. Some speculated that the company was moving to raise rates ahead of possible national healthcare reform, pending in Congress. Reform could require insurers to take all comers in the individual market, not only those they choose -- a step the industry has said would drive up costs.
Anthem members applauded state and federal officials for reviewing the matter.
“I think all this is driven by money,” said Los Angeles graphic designer Keith Knueven, whose rates will jump 37%, to $393 a month from $287. “It’s hard for to me to understand how anyone can raise rates now when so many people don’t have jobs.”
Sebelius said Anthem’s “strong financial position” made the increases “even more difficult to understand.” She cited recent profit reported by its parent, WellPoint. Last month Wellpoint announced an eightfold increase in profit for the last three months of 2009, a surge attributed largely to the sale of subsidiaries.
“I believe Anthem Blue Cross has a responsibility to provide a detailed justification for these rate increases to the public,” Sebelius wrote. “Additionally, you should make public information on the percent of your individual market premiums that is used for medical care versus the percent that is used for administrative costs.”
She continued: “Policyholders in the individual market deserve to know if their premium increases would be invested in better medical care or insurance company overhead costs like salaries, profits, and advertising. I am aware that the state of California is investigating this matter, and urge Anthem Blue Cross to cooperate fully. In the meantime, I will be closely monitoring the situation.
“At a time when healthcare costs are a critical threat to families as well as the nation’s economy, I hope you appreciate the urgent nature of this request. I look forward to your prompt reply.”