Anthem Blue Cross asked to justify controversial rate hikes

Feb 8, 2010 — Los Angeles Times

The Obama administration called on Anthem Blue Cross on Monday to justify its controversial new rate hikes of as much as 39% for individual policyholders, saying the increases were alarming at a time when subscribers are facing skyrocketing healthcare costs.

In a letter to the company's president, Health and Human Services Secretary Kathleen Sebelius voiced serious concern over the rates, which go into effect March 1 for many of the insurer's estimated 800,000 individual policyholders.

The increases have triggered widespread criticism from Anthem members and brokers, who say the premium hikes will put health coverage out of reach for some and very costly for others.

"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."

Anthem spokeswoman Peggy Hinz said the Woodland Hills-based company had not yet received Sebelius' letter, but that it would issue a statement as soon as it arrived.

The insurer has declined to say how high it would be increasing rates or how many people would be affected. But brokers who sell these policies say the increases are many and large. They said they are fielding numerous calls from customers incensed over premium increases of 30% to 39%, saying they come on the heels of similar jumps last year.

Many policyholders say the rate hikes are the largest they can remember.

Sebelius said that Anthem's "strong financial position" made the increases "even more difficult to understand." She cited recent profit reported by its Indianapolis-based parent company, WellPoint Inc. Last month the company 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."

Sebelius 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."