Anthem Blue Cross’ Statement Justifying Rate Hike Contradicted by Internal Documents

Anthem Blue Cross

Anthem Blue Cross’ parent company, WellPoint Inc., has been called out by Congressman Henry Waxman over discrepancies between the company’s public statement explaining why it was hiking rates on individual insurance premiums in California and the health insurer’s own internal documents, which tell a different story.

Last Friday, in response to widespread criticism over Anthem Blue Cross’ planned 39 percent rate increase, WellPoint said it was forced to increase rates on individual insurance plans due to the poor economic climate and the fact that healthy individuals decided to drop their coverage. The company’s rate hike is expected to affect as many as 700,000 customers.

In a statement WellPoint issued February 13, the company said:

“We are … experiencing a higher proportion of healthy individuals choosing not to enroll, leaving an insured pool that utilizes significantly more services.”

Two days earlier, in a letter sent to Health and Human Services Secretary Kathleen Sebelius, the company wrote: “One dynamic in this challenging economy is that … individuals who do not need services disenroll or choose not to enroll.”

But Waxman, the chairman of the House Energy & Commerce Committee, and subcommittee chair Bart Stupak (D-Michigan), pointed out in a letter they sent Thursday to WellPoint Chief Executive Angela Braly that, according to data the company submitted to the National Association of Insurance Commissioners, in 2009 “membership did not decrease, but increased significantly – by over 7%.”

“According to this data, enrollment in Anthem Blue Cross in California increased from 583,967 individual policyholders at the end of 2008 to 627,082 individual policyholders at the end of the third quarter of 2009,” the letter to Braly states. “We request that you explain why you have asserted that declining enrollment caused by the recession justifies your exceptionally large rate increases when your own data appears to show that your enrollment is growing.

“As part of your explanation, please provide the enrollment figures for each health insurance product offered by Anthem Blue Cross in the individual market in California, segmenting the enrollment figures by product line for the last five years. Please also indicate the year each product was initially offered and, if applicable, when it was closed to new enrollees.”

Braly is expected to testify next Wednesday before Stupak’s subcommittee about the company’s planned rate hike. Her appearance before Congress will come a day before President Barack Obama hosts a bipartisan health care summit at the White House where he hopes Republicans and Democrats can reach an agreement on a heatlh care bill. Obama has cited the Anthem Blue Cross rate hike several times this month to underscore the urgency in passing legislation to reform the health care industry.

The rate hike was due to take effect March, but last Saturday California Insurance Commissioner Steve Poizner announced that he had reached an agreement with Anthem Blue Cross to delay the rate increase by two months pending the results of an outside review ordered by Poizner.

Poizner, a GOP gubernatorial candidate, said the 39 percent rate hike doesn’t add up given that “medical cost inflation in California is in the 10 to 15 percent range.”

He told reporters that an outside actuary hired to conduct the review was “instructed … to review the rates with a fine-tooth comb” to determine if the rate hikes are excessive and ensure that Anthem Blue Cross is spending 70 cents of every dollar on premium medical care as required by state law.

If the actuary finds “that these rate increases were unwarranted, I will immediately take action to get Anthem Blue Cross to follow the law and lower their rates.”

Poizner, however, would not have the authority to regulate the rate hike if the outside review concludes it is not excessive and the company is spending the appropriate funds on premium medical care.

“Tip of the Iceberg”

White House press secretary Robert Gibbs told reporters aboard Air Force One Thursday that Anthem Blue Cross’ planned rate hike is “very much the tip of the iceberg.”

“We’ve seen this happen throughout the country,” Gibbs said. “And without a concerted effort to drive down costs through comprehensive health care reform, more and more people across this country are going to open their mail, open letters from insurance companies, and realize that, regardless of what they did last year and, quite frankly, regardless of what health care spending does, they’re in for a big rate increase. And I don’t think that that’s what those individual policyholders have in mind.”

Gibbs highlighted a critical report released Thursday by Sebelius that said health insurance companies were also planning rate increases in Connecticut, Maine, Michigan, Oregon, Rhode Island, and Washington.

The report, Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System, is being used as way of drumming up support from lawmakers for the foundering health care bill. Indeed, the report contains a list of bullet points on why Congress should swiftly pass a health care bill. The administration also launched a website,, to tout its reform efforts and highlight the skyrocketing increases health insurance companies have planned.

“Premium hikes in California and across the country are a wakeup call,” Sebelius said. “It’s time for Congress to pass reform and hand control over health care decisions back to American families and their doctors.”

According to the report, “some of the premium increases requested by insurance companies are 5 to 10 times larger than the growth rate in national health expenditures.”

Additionally, the profit margin “for the ten largest insurance companies increased 250 percent between 2000 and 2009, ten times faster than inflation” and “recent data show that the CEOs of America’s five largest insurers were each compensated up to $24 million in 2008.”

“Last year, as working families struggled with rising health care costs and a recession, the five largest health insurance companies – WellPoint, UnitedHealth Group, Cigna, Aetna, and Humana – took in combined profits of $12.2 billion, up 56 percent over 2008,” the report states. “These health insurance companies’ profits grew even as nominal GDP decreased by 1 percent over this same time period.”

WellPoint earned a profit of $2.7 billion in the last quarter of 2009 alone.

The report released by Sebelius notes:

  • Anthem of Connecticut requested an increase of 24 percent last year, which was rejected by the state.
  • Anthem in Maine had an 18.5 percent premium increase rejected by the state last year as being “excessive and unfairly discriminatory” – but is now requesting a 23 percent increase this year.
  • In 2009 Blue Cross Blue Shield of Michigan requested approval for premium increases of 56 percent for plans sold on the individual market.
  • Regency Blue Cross Blue Shield of Oregon requested a 20 percent premium increase.
  • UnitedHealth, Tufts and Blue Cross requested 13 to 16 percent rate increases in Rhode Island.
  • Rates for some individual health plans in Washington increased by up to 40 percent until Washington State imposed stiffer premium regulations.

Resurrecting the Public Option

Meanwhile, 17 Democratic senators have signed a letter calling on Senate Majority Harry Reid to “bring for a vote before the full Senate a public health insurance option under budget reconciliation rules,” which would only require 51 votes to pass.

“There are four fundamental reasons why we support this approach – its potential for billions of dollars in cost savings; the growing need to increase competition and lower costs for the consumer; the history of using reconciliation for significant pieces of health care legislation; and the continued public support for a public option,” the letter says.

Last month, during an appearance at the House Republican Conference in Baltimore, Obama described his health care plan as “pretty centrist,” a major point of concern for many of his supporters who have insisted that the package include, at the very least, a public option, or government-run plan, to compete with private insurers.

The public option was included in a version of the House bill passed last year, but stripped when the legislation reached the Senate in December.