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Anthem's parent company defends health insurance rate hike

WellPoint says the increases of as much as 39% reflect rising medical costs and that its profit margin in California is 'in line with and below that' of competitors.

February 12, 2010|By Duke Helfand

The parent of beleaguered Anthem Blue Cross offered a spirited defense Thursday of large premium increases for customers with individual health insurance policies in California, but critics -- including the Obama administration -- voiced skepticism.

In a letter to the administration, health insurance giant WellPoint Inc. of Indianapolis said that increases of as much as 39%, set to take effect March 1, reflect soaring medical costs and an exodus of healthy consumers from its ranks.

Company executives said that less than a quarter of affected Anthem customers in California will see rate increases of 35% to 39%. The average will be about 25%, while some customers will see rates fall, they said.

Anthem, the state's largest for-profit insurer, has about 800,000 individual policyholders in California.

Brian Sassi, who oversees individual policies throughout the nation for WellPoint, called the 39% increases "the worst-case scenario."

"That's the highest end of the range," he said. "We appreciate that that is a sizable increase . . . but it is not the majority of the people."

Health and Human Services Secretary Kathleen Sebelius, who had demanded that WellPoint justify its California rate increases, criticized its explanation.

Sebelius predicted that the new premiums would force some customers of the Woodland Hills-based Anthem to cut their benefits or join the ranks of California's uninsured.

"It remains difficult to understand how a company that made $2.7 billion in the last quarter of 2009 alone can justify massive increases that will leave consumers with nothing but bad options.

"High healthcare costs alone cannot account for a premium increase that is 10 times higher than national health spending growth."

President Obama also has singled out Anthem, citing its premium increases as a reason for Congress to pass healthcare reform.

On Thursday, Senate Majority Leader Harry Reid (D-Nev.) added his voice to a chorus of criticism by state and federal officials, condemning Anthem's "greed" and "reckless decisions" without citing the company by name.

Reid said the rate increases and Anthem's decision to adjust premiums more than once a year would hurt consumers and the economy.

"It means that more people won't be able to afford any coverage at all," Reid said. "It means more people will be living just one accident, one injury or one pink slip away from losing everything."

Anthem faces three inquiries over its rates, which follow what policyholders say were large increases last year. Congress has opened an investigation, and a panel of the House Committee on Energy and Commerce has scheduled a hearing Feb. 24.

The California Assembly's health committee will conduct its own hearing Feb. 23.

California Insurance Commissioner Steve Poizner, meanwhile, has called on Anthem to delay its increases while an independent actuary reviews them, and state Atty. Gen. Jerry Brown is trying to determine whether he has jurisdiction.

Sassi, president of WellPoint's consumer business unit, said in his letter to Sebelius that WellPoint is cooperating with the review by Poizner's department.

"We welcome the scrutiny and are confident that our rates reflect anticipated medical costs and are established consistent with actuarial principles and state law," he wrote.

Sassi said in the letter that Anthem's insurance policies "remain very competitively priced when compared with the dozens of other plans competing in the California individual market."

He also said that Anthem's profit margin in the state is "in line with and below that" of competitors.

Sassi said that Anthem's individual policy business in California lost money in 2009 -- although he did not say how much -- because the company paid out more in claims than it received in premiums.

He said the weak economy prompted many customers to switch to lower-cost options and led healthier consumers to go without insurance, leaving a smaller pool of ailing customers to share the cost of coverage.

Losses in insurance programs, such as one for high-risk customers with illnesses that make coverage difficult to find, also added to the red ink, he said.

Sassi said that Anthem members can choose alternatives from the insurer.

"We care deeply about our California customers and community," Sassi wrote.

"Clearly, we understand that these increases create a challenge for many of our members," he added. "However, it is important to know that our members often have a choice of coverage."

duke.helfand@latimes.com

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