Insurer WellPoint Cites Cause of Rate Hike

Health insurer WellPoint blames a shift in demographics and rising medical costs for its planned 39 percent rate hike for some California customers.

WellPoint Inc. is responding Thursday to a federal inquiry into the steep premium increase planned for some customers who buy individual policies from its Anthem Blue Cross subsidiary.

The Associated Press obtained a copy of a letter from the insurer to the Health and Human Services Secretary.

WellPoint says healthy people are dropping coverage or buying cheaper plans. That has squeezed revenue available to cover claims and resulted in a 2009 loss for the unit.

WellPoint says a minority of customers will see 39 percent increases.

In his push to move stalled health care reform, President Barack Obama has said the rate hike is a sign of what will happen to many Americans without reform.

"Premiums will continue to rise for folks with insurance, millions more will lose their coverage altogether, our deficits will continue to grow larger," Obama said Tuesday at a White House briefing. It was the second time in a week Obama publicly cited the Anthem rate hike as a reason Congress should advance stalled health reform legislation.

Calling renewed effort on both sides of the aisle, Obama told reporters that "without some action on the part of Congress, it is very unlikely that we see any improvement over the current trajectory" of rising premiums.

A congressional hearing will be held Feb. 24, at the request of Rep. Henry Waxman, D-California, and Bart Stupak, D-Michigan. They requested information from the company on its rate increases, calling on Angela Braly - president and CEO of Anthem's parent company, WellPoint Inc - to testify.

In a Tuesday post to the White House blog, Health and Human Services Secretary Kathleen Sebelius repeated demands that Anthem, California's largest for-profit health insurer, answer questions on how much profit the insurer will reap from the hike. Sebelius issued a sternly worded letter to the company on Monday.

California Insurance Commissioner Steven Poizner announced an inquiry into the rate hike on Monday, which doesn't require the state's approval, to ensure that it abides by state regulation and 70 percent of income from premiums will be directed to medical costs.

In an interview Tuesday with the Associated Press, Poizner said Anthem had not responded to his letter, adding the insurer "would be quite wise to postpone their rate increase" until after his department's review.

"Anthem Blue Cross, or any health insurance company, can't pick and choose who to raise prices on," said Poizner. "Part of our analysis of what Anthem Blue Cross is doing is we're going to make sure they're not discriminating" against a segment of their customer base.

Poizner is vying for the Republican nomination in the next California gubernatorial race.

Health insurance analysts agreed that the rise in individual premiums will be echoed on a smaller scale in the rest of the marketplace. Employer-based insurance and group policies will likely see 10 to 20 percent increases in the next year, said health industry consultant Robert Laszewski.

About 13 million Americans purchased health insurance through the individual market in 2008, the most recent data available. Surges in their premiums can be explained by competing interests: Insurance companies are working to maintain earnings expectations in the face of rising costs, while rising premiums are driving healthy people to drop coverage, Laszewski said.

California's Democratic Sen. Dianne Feinstein on Tuesday called the rate hike unconscionable, saying it was proof of the need for reform. She also called for Congress to remove the health insurance industry's antitrust exemption "to ensure a fair, competitive market is not dominated by a handful of companies."

Various insurers have mandated rate hikes on individual policies across the country in recent years, though California's increase is larger than most. Last month, Anthem Blue Cross and Blue Shield filed for a 23 percent rate hike on 11,066 individual policies in Maine. In November, Oregonians holding individual policies with Health Net Health Plan of Oregon faced a 22.8 percent hike.

The Los Angeles Times first reported the California rate hikes last week. Anthem notified customers that rates would go up beginning March 1 and might start increasing more frequently than the usual annual increases. The company 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.

Indianapolis-based WellPoint 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.