The Obama administration on Monday asked California's largest for-profit health insurer to justify plans to hike customers' premiums by as much as 39 percent, a move that could affect some 800,000 customers.
In a letter to the president of Anthem Blue Cross, Health and Human Services Secretary Kathleen Sebelius said she was very disturbed to learn of the planned increases, calling them "extraordinary." She said they were hard to understand in light of the profitability of Anthem's parent company, WellPoint Inc.
"I believe Anthem Blue Cross has a responsibility to provide a detailed justification for these rate increases to the public," Sebelius wrote. She said the company should also make public what percentage of customers' premiums go to medical care versus administrative costs.
Peggy Hinz, a spokeswoman for Anthem, said she would check whether the letter had been received.
President Barack Obama cited the Anthem rate hikes in an interview with CBS' Katie Couric on Sunday as a reason to move forward with his health overhaul legislation, which is stalled in Congress.
"That's a portrait of the future if we don't do something now," Obama said. "It's gonna keep on beatin' down families, small businesses, large businesses. It's gonna be a huge drain on the economy."
The Los Angeles Times reported the rate hikes last week. They could affect many of the approximately 800,000 customers who purchase insurance directly from Anthem, as opposed to getting coverage through their employers.
Anthem notified customers that rates would go up beginning March 1 and might increase more frequently going forward than the usual annual increase. The increases ranged from 30 percent to 39 percent.
The company has declined to provide details on the rate increases such as how many people would be affected or how much the new rates would be. It's also not clear whether customers in other states are being affected. In a statement last week the company blamed the increases on rising costs of medical care.
"We understand and strongly share our members' concerns over the rising cost of health care services and the corresponding adverse impact on insurance premiums," the statement said. "Unfortunately, the individual market premiums are merely the symptoms of a larger underlying problem in California's individual market — rising health care costs."
California Insurance Commissioner Steve Poizner is hiring an outside actuary to determine whether Anthem is spending at least 70 percent of premium dollars on medical care as opposed to administrative costs, as required by state regulations. Poizner's spokesman, Darrel Ng, said that's the only recourse because the state doesn't have authority to sign off on rates.
WellPoint earned $536 million in the final three months of 2009, not counting roughly $2.2 billion it gained in the fourth quarter for the sale of a pharmacy benefit management subsidiary. The Indianapolis company is the largest commercial health insurer based on membership. It operates Blue Cross Blue Shield plans in 14 states and Unicare plans in several others.
Associated Press Writers Shaya Mohajer in Los Angeles and Tom Murphy in Indianapolis contributed to this report.
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