Waxman Launches Probe Into Blue Cross’ Massive California Rate Increases

Henry Waxman, the Democratic chairman of the powerful House Committee on Energy and Commerce, launched an investigation Tuesday into massive rate increases Anthem Blue Cross intends to impose on as many as 800,000 California customers beginning March 1.

Waxman (D-California) and Subcommittee on Oversight and Investigations Chairman Bart Stupak (D-Michigan) sent a letter Tuesday to Angela F. Braly, chief executive of Blue Cross parent company WellPoint, asking her to voluntarily testify before the subcommittee February 24 and provide “a detailed explanation of the reasons for the premium rate increase proposed by Blue Cross in California.”

Last week, The Los Angeles Times reported that Anthem Blue Cross, California’s largest for-profit insurance provider, planned to hike individual insurance premiums by as much as 39 percent. California state officials and the Obama administration have called on Anthem Blue Cross and WellPoint executives to justify the rate hikes, noting that the parent corporation saw its profits skyrocket last year.

Indeed, WellPoint’s profit for all of 2009 was $4.7 billion, nearly twice as much as the company earned the year before. Since 2004, the company has generated $16.7 billion in profits. The corporation’s top five executives received more than $20 million in compensation in 2008.

Details of the rate increase lead to a major backlash against the insurance giant and put an even brighter spotlight on the urgent need for comprehensive health insurance reform.

President Barack Obama told reporters during a press briefing Tuesday that if Congress doesn’t “act [the Blue Cross rate hike] is just a preview of coming attractions. Premiums will continue to rise for folks with insurance; millions more will lose their coverage altogether; our deficits will continue to grow larger. And we have an obligation – both parties – to tackle this issue in a serious way.”

On Monday, Health and Human Services Secretary Kathleen Sebelius faxed a letter to Anthem Blue Cross President Leslie Margolin demanding the insurance company “provide a detailed justification for these rate increases to the public. Additionally, you should make public information on the percent of your individual market premiums that is used for medical care versus the percent that is used for administrative costs.” Sebelius added that the “extraordinary increases are up to 15 times faster than inflation.”

In their letter to Braly, Waxman and Stupak asked her to provide the committee by February 19 with:

• All internal communications, including e-mail, to or from senior corporate management relating to the company’s decision to increase premium rates in California in the individual insurance market
• All presentations to senior corporate management, or government agencies, relating to increases in premium rates in California in the individual health insurance market
• For each year from 2004 to 2008, a table listing, as applicable, premium revenue, claims payments, sales expenses, other general or administrative expenses and profits for all individual health insurance products, including an explanation of the methodology used for these calculations, for Anthem Blue Cross in California; and
• A table listing all proposed premium increases from January 1, 2009, through December 31, 2010 in the individual health insurance market for all WellPoint subsidiaries, including the amount of the proposed premium increase, the subsidiary, the state affected, and a detailed explanation of reasons for the increase

As Truthout reported Monday, details of the rate increase resulted in a swift backlash against the insurance provider.

California Insurance Commissioner Steve Poizner announced last week that he has already hired an “outside actuary” to determine if the rate hikes were excessive and if Anthem Blue Cross was spending 70 cents of every dollar on premium medical care as required by state law.

“If we find that their rates are excessive, I will use the full power of my office to bring these rates down,” Poizner said.

Poizner, a Republican gubernatorial candidate, also called on Anthem Blue Cross to suspend the rate hikes until May 1, pending the results of the independent review.

“At my direction, the Department is retaining an independent actuary to analyze Anthem’s proposed rate increases,” Poizner said in a letter he sent Monday to Angela F. Braly, president and chief executive of Anthem’s parent company, WellPoint, Inc., and Larry C. Glasscock, WellPoint’s chairman.

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

Poizner asked Braly and Glasscock to respond to his request by February 15. A spokesperson for WellPoint was unavailable for immediate comment.

In a statement Monday, Anthem Blue Cross said the planned rate hike was due to the “weak economy” and called on lawmakers to “go back to the beginning and get health care reform done right.”

“… As medical costs increase across our member population, premium increases to the entire membership pool result. Unfortunately, in the weak economy many people who do not have health conditions are foregoing buying insurance. This leaves fewer people, often with significantly greater medical needs, in the insured pool. We regret the impact this has on our members. It highlights, why we need sustainable health care reform to manage the steadily rising costs of hospitals, drugs and doctors.”

On Sunday, Obama told CBS News anchor Katie Couric that he planned to hold a bipartisan health care summit at the White House on February 25, a day after WellPoint’s Braly was asked to testify before Congress, to revive the dormant health care bill Republicans have fiercely opposed.

The rate hike in California has also led interest groups, such as National Nurses United (NNU), the nation’s largest union representing registered nurses, to urge California lawmakers and Gov. Arnold Schwarzenegger to support SB 810, a single-payer health care bill that passed the state Senate last month and has been sent to the Assembly for consideration.

The bill, sponsored by Sen. Mark Leno (D-San Francisco), closely mirrors what Rep. Dennis Kucinich (D-Ohio) had envisioned when he introduced an amendment last summer that would have allowed individual states to create a single-payer system.

Kucinich’s amendment, however, was quietly stripped from the House version of a health care bill on orders from the White House after the legislation was unveiled last winter.

The measure would be financed by using a combination of state and federal funds that California already earmarks for health care along with a payroll tax, the amount of which would be decided later.

The Medicare-for-all system would be extended to all California residents and individuals would have the opportunity to purchase private insurance to cover specific types of services not included in the government-run plan.

California Gov. Arnold Schwarzenegger said he would veto Leno’s bill if it reaches his desk, just as he has done with two other similar single-payer initiatives.