Santa Monica, CA – In a letter to California Insurance Commissioner Steve Poizner, Consumer Watchdog said internal communications of Anthem Blue Cross of California’s parent company, WellPoint, obtained by Congress show intent to deceive state regulators, and called for Poizner to conduct a rigorous and public review of Blue Cross’s finances. Poizner must entirely reject premium increases by Blue Cross because of unlawful financial manipulations and deceit by Wellpoint, said Consumer Watchdog.
Download the letter here: http://www.ConsumerWatchdog.org/resources/PoiznerAnthemRateLetter.pdf
Consumer Watchdog expressed concern that the Department of Insurance ("Department") has refused to release the data submitted to the Department by Blue Cross to justify its premium increases. Consumer Watchdog called on Poizner to make the information publicly available in a Public Records Act request filed with the Department yesterday.
The letter highlights evidence that WellPoint inflated the amount of the Blue Cross premium increases in California so that the company could make a face-saving capitulation to Poizner if and when the commissioner complained about the rates. The letter also outlines billions of dollars in cash transfers by Blue Cross to parent company WellPoint since 2003 that, in the wake of recently announced rate increases up to 39%, must be investigated, said Consumer Watchdog.
In the letter sent today, Consumer Watchdog wrote:
“According to congressional investigators, internal documents from Anthem Blue Cross’s parent company Wellpoint, Inc. show that the company intentionally padded the massive rate increases Blue Cross seeks to impose on hundreds of thousands of Californians. E-mails by its executives casually call for a higher percentage increase than was necessary, for the purpose of allowing the company to make a subsequent reduction in its rate in the event that you objected, or retain a higher profit if you did not. Submitting inflated data in order to win approval of a still exorbitant increase is not only a cynical attempt to mislead you and the public, it is a violation of California’s insurance laws. Blue Cross’s rate increases should be rejected outright for that reason alone.
“Wellpoint’s duplicity reinforces our view, as we explain in this letter, that you have both the authority and the evidence to stop Blue Cross from increasing its premiums, and that your investigation should be conducted with full public scrutiny and participation, rather than behind closed doors. Your Department has indicated that it will not make public the data and justification provided by Blue Cross regarding its rate increase. These filings are clearly public records, and in conjunction with this letter we are serving you with a Public Records Act request. …
“In light of the latest revelations, a closed-door investigation is not a viable approach, not that it ever was. A suspicious public is rightly angry that an insurance company assumed it could overprice policies and quietly negotiate away any public scrutiny. If you continue to choose not to make public the information that Blue Cross provides to you, any conclusion you might reach to permit any portion of the rate increase from taking effect will be met with public outrage. Moreover, you will inevitably share the blame for pricing health insurance out of reach for tens of thousands more families, even if you succeed in modifying the increases. Complete transparency and robust use of your Department’s powers will help to restore public trust, enhance the Department’s reputation, and speed development of better public policy.”
Consumer Watchdog commends Poizner for securing a 60-day delay in proposed rate increase from Blue Cross. Poizner called for the 60-day delay to give the Department time to investigate whether Blue Cross violated state regulations requiring insurers to spend 70% or more of the premiums they collect on medical care. But Consumer Watchdog’s letter says the Commissioner must reject the company’s current rate increase because of WellPoint’s attempts to deceive, and calls on Poizner to investigate violations of an agreement between the Department and WellPoint related to WellPoint’s 2004 merger with Anthem. That agreement barred the company from increasing consumer premiums in order to pay for hundreds of millions of dollars in merger-related bonuses awarded to company executives. Consumer Watchdog called for a public process, including the release of actuarial and other financial documents offered by Blue Cross as justification for the current increases.
Consumer Watchdog urged Poizner not to fall for Blue Cross manipulations that have been exposed by the U.S. House subcommittee on oversight and investigations. Documents obtained by the committee show that Blue Cross padded its rate increase by 5% in anticipation of possible objections by the Department regarding the size of its premium increases. Other documents cited in the letter indicate that Blue Cross was also deliberately overstating the size of its projected costs to justify the increases.
Download the emails from the House Energy and Commerce Committee website at: http://energycommerce.house.gov/documents/20100224/E-mail.from.Barry.Shane.to.Cindy.Miller.October.7.2009.pdf
In the letter, Consumer Watchdog wrote:
“According to a memorandum prepared by the Subcommittee on Oversight and Investigations of the House Energy and Commerce Committee, internal company documents provided to the committee by WellPoint, Inc. show that WellPoint padded its rate increase by five percentage points to counteract anticipated concessions to you concerning the size of its premium increases. . . . You should not permit yourself and your office to become a pawn in Wellpoint’s game. You already ordered the ‘two-month delay’ that WellPoint predicted. Under these circumstances, the public will not accept the kind of ‘split the baby’ regulatory response that WellPoint clearly expected, in which they ‘concede’ to some limited reduction that you ‘order,’ at least absent full public scrutiny of WellPoint’s original filing and all subsequent documentation submitted to you pursuant to your investigation.”
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Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at: http://www.ConsumerWatchdog.org