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Obama Administration Blasts Anthem Blue Cross Rate Hikes

(AP Photo/Charlie Riedel)
The Obama administration is asking why Anthem Blue Cross is raising its health insurance rates by nearly 40 percent for some California customers while making handsome profits -- and is pointing to the rate hike as evidence of why health care reform needs to pass.

Anthem Blue Cross will raise rates on March 1 for many of its approximately 800,000 customers in the individual market, the Los Angeles Times reported last week. Some customers say they have been notified of increases from 30 percent to 39 percent, following similar rate hikes last year. Meanwhile, Anthem's parent company, WellPoint Inc., recently announced an eightfold increase in profits for the last three months of 2009, bringing its earnings -- for just that quarter -- to $2.7 billion.

Health and Human Services Secretary Kathleen Sebelius sent a letter (the Huffington Post has a copy of it here) to Anthem Blue Cross president Leslie Margolin saying she is "very disturbed" about the news of the rate hike. She also said she will be "closely monitoring the situation," which is already under investigation by the state of California.

"These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy," Sebelius wrote. "Your company's strong financial position makes these rate increases even more difficult to understand."

Sebelius tells Anthem that it has a responsibility to provide the public with detailed justification for its rate increases, as well as information on the percent of premiums spent for medical care versus administrative costs.

President Obama told CBS News' Katie Couric on Sunday that the rate hike illustrates how critical health care reform is.

"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."

Other health reform advocates are also pointing to the hike as a reason to keep pressing legislators to finish the bill.

"This exact problem -- individuals having to fight with insurance companies on their own for decent, affordable coverage -- is what health reform is designed to solve," writes Jason Rosenbaum for the liberal group Health Care for America Now.