Consumer group alleges huge jumps tied to merger
Ventura County Star
A California consumer group is calling on Gov. Arnold Schwarzenegger and Insurance Commissioner John Garamendi to investigate rate increases for some Blue Cross of California health insurance customers.
The Foundation for Taxpayer and Consumer Rights wants an audit to make sure the premium increases it has heard about in the past two weeks are not passing on the cost of the $16.5 billion merger of Anthem Inc. and WellPoint Health Networks Inc. to customers. The resulting company, WellPoint Inc., is the parent company of Blue Cross of California in Thousand Oaks.
The agreement that allowed the merger explicitly states the merger costs would not be passed on to consumers.
Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights said the organization has recently received “several dozen e-mails and phone calls” about 20 percent to 50 percent rate increases.
“The appearance is that Blue Cross has broken its promise to the state of California,” said Flanagan, a legislative analyst for the nonprofit group based in Santa Monica.
A spokesman for Garamendi said the office has been investigating the rate increases.
“It was very clear that no part of any premium can be used to pay for merger costs,” Garamendi said in a statement. “We are investigating this to test the validity of their filings. If we find that any increase was connected to the merger, it will be rolled back.”
The state Department of Managed Health Care, which handles patients covered by HMOs, also plans to look into the increases, said Lynne Randolph, deputy director of communications. The department does not approve or set rates.
“We’re extremely concerned about the premium trend, if they are significantly above actual medical costs,” Randolph said.
But company officials said the rate increases, which were on individual policies, had nothing to do with the cost of the merger and everything to do with the rising cost of healthcare.
The rate increases were filed with the insurance commissioner’s office in January, said Michael Chee, director of corporate communications for Blue Cross of California.
“The rate increase is in absolutely no way, shape or form tied to our merger,” he said.
Blue Cross of California has about 850,000 individual policyholders in the state, though not all of those received rate increases, Chee said.
The increase, averaging about 13 percent, reflected increases in rates charged by doctors and hospitals, medical services such as operating rooms or supplies, the cost of new technology and prescription drugs, and the increasing use of services by members, he said.
“Our job is to have premiums to be able to cover the cost of care,” he said.
WellPoint Health Networks Inc., previously based in Thousand Oaks, merged with Anthem Inc. in November. WellPoint Inc., the country’s largest health insurance company, now is headquartered in Indianapolis, except for the Blue Cross of California operations.
Anthem had to pledge $265 million toward improving healthcare in California to win approval from Garamendi. At the time of the merger, Garamendi’s office released a statement that Blue Cross of California would have to file rate and product changes for his review to ensure that no rate costs were used to help pay for the merger.
Garamendi’s office started investigating after being notified in January that an increase was coming.
“We’re not taking it at their word; we’re going to investigate it,” said Byron Tucker, deputy commissioner.
Chee said the allegations that the company is trying to pass on merger costs is unusual because it has made so many commitments to allay those concerns.
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