Administration Keeps Firing at California Health Insurer

(AP Photo/Charlie Riedel)
The Obama administration remains skeptical of the rationale a major insurance company is giving for the stark rate increases it is imposing on some of its California customers.

The company, WellPoint, responded this week to questions from the administration regarding rate hikes in the California individual insurance market that are as high as 39 percent.

In a letter to Health and Human Services Secretary Kathleen Sebelius, WellPoint executive Brian Sassi said the rate increases reflect higher medical costs and the loss of healthy customers from its pools as a result of the recession, the Los Angeles Times reports. Sassi called the rate hikes "the worst-case scenario."

In a statement released Thursday, Sebelius said the explanation was not good enough.

"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: pay more for coverage, cut back on benefits or join the ranks of the uninsured," she wrote. "High health care costs alone cannot account for a premium increase that is 10 times higher than national health spending growth."

Sebelius added that the situation was an example of why Congress should enact comprehensive health care reform. President Obama also made the case to CBS News' Katie Couric on Sunday.

"That's a portrait of the future if we don't do something now," he said. "It's going to keep on beating down families, small businesses, large businesses; it's going to be a huge drain on the economy."

Backing up that argument, the liberal group Health Care for America Now released a report Thursday showing that the top five insurers in the nation brought in record profits in 2009, at $12.2 billion, while covering fewer people. The group contends that fewer people were insured not because they chose to drop their plans but because insurance companies were "leaving behind" some customers.

"Big insurance made more money by insuring fewer people and by trying to get rid of the people who need health care the most," Richard Kirsch, national campaign manager of HCAN, said in a statement.

The report also says three of the top five insurers are spending a smaller proportion of premium dollars on health care expenses, with more money from premiums going to administrative expenses and profits.