California Regulator Wants Anthem Blue Cross To Postpone Rate Increase

February 10, 2010

California Insurance Commissioner Steve Poizner, responding to a dramatic proposed rate hike by WellPoint’s California affiliate, Anthem Blue Cross, has called on WellPoint executives to postpone the rate increase, allowing the California Department of Insurance proper time for an independent actuarial review of the proposal.

Anthem submitted to the California Department of Insurance a proposed rate increase of as much as 39 percent for individual health insurance. Anthem wants to implement the increases on March 1 and blamed the weak economy and rising health care costs for its rate hike.

The company declined to say how many of its 800,000 individual policyholders in California are being affected by the hike. However, Health and Human Services Secretary Kathleen Sebelius demanded specifics in a sternly-worded letter, saying the insurer has “a responsibility to provide a detailed justification for these rate increases.”

President Barack Obama criticized the Anthem rate hike in a CBS News interview, saying employer and group policies can expect to see premiums rise if his health overhaul doesn’t move through Congress where it has stalled.

“As a public benefit and to ensure that policyholders are not forced into financial hardship as a result of Anthem’s proposed rate increases,” Poizner said, “I am asking that Anthem agree to postpone those rate increases until the Department’s independent actuary completes his review.”

The DOI is retaining an independent actuary to analyze Anthem’s proposed rate increases the Commissioner said, to ensure that Anthem’s actuarial assumptions are justified and that Anthem pays out at least 70 cents of each premium dollar received for benefits, as required by California law. DOI spokesman Darrel Ng, said that’s the only recourse because rate hikes do not need to be approved by the state.

“This is a time of unprecedented economic distress for consumers in America. The premium increases Anthem proposes for critically needed individual health insurance could have a devastating financial impact on hundreds of thousands of its policyholders in California,” Poizner said. He said the DOI has received numerous complaints from irate Californians describing how Anthem’s proposed rate increases would cripple them financially.

Poizner asked Anthem to postpone implementation of its rate increases until May 1, 2010.

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 percent 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.

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.

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.

The Associated Press contributed to this report.

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