WASHINGTON—Health and Human Services Secretary Kathleen Sebelius on Monday asked the president of Anthem Blue Cross in California to justify an expected 39% rate hike.
In a Monday letter to Leslie Margolin, president of the Woodland Hills, Calif.-based insurer, Ms. Sebelius said she was “very disturbed” to learn through media accounts of Anthem's plans to increase premiums for its individual policyholder customers in California up to 39%.
“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,” Ms. Sebelius said in the letter.
“Your company's strong financial position makes these rate increases even more difficult to understand. As you know, your parent company, WellPoint Inc., has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone,” Ms. Sebelius said in the letter.“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 vs. the percent that is used for administrative costs.”
President Barack Obama referred to the Anthem rate hikes in a pre-Super Bowl television interview Sunday. “That's a portrait of the future if we don't do something now. It's going to keep on beating down families, small businesses, large businesses; it's going to be a huge drain on the economy. We're going to have to do something about it, and I think we can,” he said.
Anthem responded to the letter with a statement that said, “It is important to note that individual medical insurance premiums do not reflect an individual member’s personal claims experience.
“Therefore, as medical costs increase across our member population, premium increases to the entire membership pool result. Unfortunately, in the weak economy, many people who do not have health conditions are forgoing buying insurance. This leaves fewer people, often with significantly greater medical needs, in the insured pool. We regret the impact this has on our members.
“It highlights why we need sustainable health care 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 health care reform done right. At the same time, we are engaging with a broad range of key stakeholders across California to discuss the state’s individual insurance market and share ideas on how we can collectively partner on meaningful change,” Anthem said in the statement.
A spokesman for the California Insurance Department said it is asking an outside actuary to review Anthem’s rate hikes to ensure it is complying with the law and spending 70% of premiums on medical benefits. He said it is standard to review rate hikes, but the department is taking the additional step of hiring an actuary because Anthem is the largest insurer in California’s preferred provider organization market. “Because of their size, they get additional scrutiny,” the spokesman said.
An Anthem spokeswoman did not respond to a query on the department’s action.
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