Insurance giant Anthem Blue Cross drew public outrage and criticism by President Barack Obama as a poster child for out-of-control healthcare costs when it proposed raising rates for Californians by as much as 39 percent.
On Thursday, Los Angeles-based Anthem withdrew plans for the increase.
Anthem made the decision after an independent audit determined the company's justification for raising premiums was based on flawed data, state Insurance Commissioner Steve Poizner said.
The decision also came one day after Anthem's parent, WellPoint, Inc. of Indianapolis, announced its first-quarter profit soared by 51 percent.
Anthem said separately it will file a new application for a rate increase with the California Department of Insurance and the Department of Managed Healthcare, perhaps as early as next month. It added that any errors in its original application were inadvertent.
"The current application that was withdrawn today (Thursday) was just flawed," Poizner said during a conference call with reporters. He added that it contained mathematical errors and in some instances double counting of data.
Neither Poizner nor Anthem officials said just how big the insurance giant's next proposed increase would be.
But Poizner, who is seeking the Republican nomination for governor, said he expected it would be substantially less than the original.
"You can count on this," he said. "A 25 percent average rate increase up to a maximum of 39 percent rate increase, that's not going to happen in California."
Obama's criticism of Anthem's initial proposed hike signaled the turning point in the healthcare debate as he seized on Anthem as a rallying point for skyrocketing healthcare costs.
U.S. Secretary of Health and Human Services Kathleen Sebelius praised Anthem's decision to withdraw the rate hike.
The announcement "is good news for the more than 800,000 Californians who could have been hit with massive rate increases and gives them some much-needed temporary relief," Sebelius said.
Anthem notified policyholders last January that the increase would go into effect March 1. After a public outcry, the company put it on hold.
"By refiling our individual rate requests, we will also utilize updated and real-time medical utilization information as well as address inadvertent miscalculations related to the way in which we estimated our future medical costs in our initial filings," the company said in a statement.
WellPoint announced this week it will comply ahead of schedule with the federal healthcare reform provision that limits cases in which insurers can cancel coverage when a customer gets sick.
WellPoint operates Blue Cross Blue Shield plans in 14 states. Anthem Blue Cross is the trade name of Blue Cross of California.
The withdrawn increase also includes rates of Anthem Blue Cross Life and Health Insurance Co.
When it files its new proposed rates, Anthem said policyholders will be notified at least 30 days before they go into effect and current rates will remain unchanged until then.
Poizner said state insurance officials will review the change to make sure it adheres to all state statutes.
He added that state officials immediately suspected Anthem's original proposal was inaccurate, but company officials insisted it was not.
However, the company agreed to the independent evaluation by outside experts that subsequently uncovered the errors.
The study, more than 100 pages in length, will be released in the next few days, Poizner said. He said the cost of the study, which was not disclosed, is being billed to Anthem.
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