WASHINGTON, D.C. — Responding to growing outrage over plans by Anthem Blue Cross to dramatically raise health insurance rates for hundreds of thousands of Californians, Sen. Dianne Feinstein on Friday proposed giving the federal government new authority to block premium increases deemed to be "unjustified."
Feinstein’s plan, set to be introduced in legislation next week, comes amid growing controversy over Anthem’s recent rate hike announcement, which would take effect in May and increase premiums by up to 39 percent for as many as 800,000 Californians who buy insurance from the company in the individual market. The Obama administration and congressional Democrats have seized on the episode to try to revive their stalled bid to overhaul the nation’s health care system.
Feinstein, D-Calif., joined a chorus of Democrats in demanding that Anthem’s parent company, WellPoint, justify its proposed rate hike.
"This is unconscionable," Feinstein said in a statement.
While state Insurance Commissioner Steve Poizner is investigating the company’s plans, his office is largely powerless under California law to stop the rate increase from happening.
Feinstein says that should not be the case. In states such as California that lack authority to bar excessive health care premium hikes, she says, the federal government should step in.
The senator’s legislation would empower the secretary of the Health and Human Services Department to draft criteria for deciding whether a rate hike was justified, and then to block or modify a premium increase if it was deemed excessive. The rules would apply to the roughly half of all states that lack authority to regulate health insurance rates, Feinstein said.
In a conference call this week, WellPoint executives said the company lost money in the individual insurance market last year in California because of unexpectedly high medical claims. The sputtering economy prompted many young and healthy customers to drop their individual coverage, leaving more older and sicker patients on the rolls, the company said in defense of its proposed rate hike. Others in the industry say skyrocketing medical costs are also to blame.
But Feinstein and other Democrats respond that WellPoint reported $2.7 billion in earnings in the last quarter of 2009, and they say the proposed premium increase goes far beyond the rate of medical inflation. Health and Human Services Secretary Kathleen Sebelius issued a report this week citing plans for sharp rate increases in the individual health market in states other than California as well.
"It shines a light on the urgency for health reform," she said. The Democrats’ health care reform plans would attempt to bring millions more healthy Americans into the insurance pool through a requirement to buy coverage and subsidies to help low-income people afford it. But critics say the proposals would not do enough to bring down costs.
WellPoint, whose top executive is being called to testify before a House committee next week about the firm’s rate hike, did not return a call for comment on Feinstein’s proposal. But a spokesman for America’s Health Insurance Plans, an industry trade group, accused Democrats of playing politics and said Feinstein’s plan would add an unneeded layer of regulation.
"It’s an effort in Washington to shift the focus to the insurance industry," spokesman Robert Zirkelbach said, "rather than the real issue of soaring costs of medical care."
Santa Monica-based Consumer Watchdog, which for years has lobbied for rate regulation of health insurance products sold in California, called Feinstein’s plan a step in the right direction.
"It’s needed and appropriate for the federal government to provide a backstop when states can’t or won’t stand up to insurance companies," said Jerry Flanagan, a health care advocate for the group.
Contact Mike Zapler at 202-662-8921 or [email protected]