Anthem Blue Cross is raising its health insurance rates by nearly 40 percent for many of its approximately 800,000 California customers who buy individual coverage, this while while raking in handsome profits — and is pointing to the rate hike as evidence of why health care reform needs to pass.
In a letter received on February 5, 2010, Anthem Blue Cross states:
Controlling health care costs is important to you, and you can rely on the stability and experience of Anthem Blue Cross to secure the best prices possible for our members. To make sure we can continue to serve your need for health coverage protection, periodically it is necessary to adjust our rates.
Rate change effective March 1, 2010
While we strive to keep costs as low as possible, it is necessary to adjust our rates to cover the escalating cost of health care. As of March 1, 2010 the monthly rate on your PPO Share 1500 will change from $530.00 to $703.00. Anthem Blue Cross will usually adjust rates every 12 months; however, we may adjust more frequently in accordance with the terms of your health benefit plan.
This in spite of Anthem’s parent company, WellPoint Inc., announcing an eightfold increase in profits for the last three months of 2009, bringing its earnings — for just that quarter — to $2.7 billion.
Health and Human Services Secretary Kathleen Sebelius sent a letter (see a copy of it below) to Anthem Blue Cross president Leslie Margolin saying she is "very disturbed" about the news of the rate hike. She also said she will be "closely monitoring the situation," which is already under investigation by the state of California.
February 8, 2010
President, Anthem Blue Cross
Delivered Via Fax
Dear Ms. Margolin,
One of the biggest pressures facing families, businesses and governments at every level are skyrocketing health insurance costs. 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 percent. These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy.
Your company’s strong financial position makes these rate increases even more difficult to understand. As you know, your parent company, WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone.
I believe Anthem Blue Cross has a responsibility to provide a detailed justification for these rate increases to the public. 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. Policy holders 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 health care 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.
Secretary of Health and Human Services
According to the Los Angeles Times, California Insurance Commissioner Steve Poizner is demanding a delay in the increases until May 1 while a review takes place:
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."
In a statement, Anthem Blue Cross of California blamed the weak economy and rising health care costs for the rate hike, while pledging to reply to Sebelius’ query promptly.
The rate hike "highlights why we need sustainable health care reform to manage the steadily rising costs of hospitals, drugs and doctors," the statement said.