Anthem Blue Cross reduces rate hike to average 14 percent
INDIANAPOLIS — Health insurer WellPoint said Wednesday that its California subsidiary
will dial down rate hikes that drew national outrage earlier this year
and helped spark a final push for health care reform.
The Indianapolis insurer said the subsidiary, Anthem Blue Cross, now
plans to raise premiums by 14 percent on average for people insured
individually and it will cap the hikes at 20 percent.
In April, the company withdrew increases that stretched as high as 39
percent and averaged 25 percent after it received strong rebukes from
consumers, President Barack Obama and members of his administration.
For instance, Health and Human Services Secretary Kathleen Sebelius has
said she found it hard to understand how Anthem Blue Cross could ask for
such steep hikes after its parent reported a $4.75 billion profit in
WellPoint has said its rates have been driven up by rising medical costs
and healthy people dropping coverage during the recession, among other
WellPoint’s original proposed rate hike in California is widely seen as
having reignited Obama’s push for a health care reform measure that
covers millions of uninsured people. That bill passed Congress in March
after months of debate.
WellPoint is the largest U.S. commercial health insurer based on
membership. Its California individual insurance business covers around
WellPoint executives said their new rates are lower for several reasons,
including the use of more recent claims data and a hope that regulatory
review would go faster. Further delay would "just compound the issue
into next year," said Brian Sassi, president and CEO of WellPoint’s
Consumer Business unit.
The insurer said it expects to lose more than $100 million this year on
its California individual insurance business.
"Our losses are really primarily driven by the lost revenue just from
the six-month delay we already have," Sassi said.
The 14 percent average increase is a few percentage points below the
expected increase in medical costs, according to Brad Fluegel,
WellPoint’s chief strategy officer.
"Those costs are continuing to go up quite dramatically," he said.
State regulators have 30 days to review the rates, and then the insurer
must give customers 30 days’ notice on the hikes. WellPoint hopes to
have the new rates go into effect by Sept. 1, which is six months after
the original increases were to hit.
WellPoint backed off its original proposed hikes after an independent
audit determined they were based on flawed data. California Insurance
Commissioner Steve Poizner said in April the audit found mathematical
errors and, in some cases, double counting of data.
Another insurer, Aetna Inc., withdrew proposed California rate hikes of
19 percent on average earlier this month, after an independent review
found errors in its calculations.
WellPoint officials said Wednesday its own math errors had a "minimal
impact" on the size of the old increase.
Anthem Blue Cross has become a poster child for stricter premium
regulation, said Jamie Court, president of Consumer Watchdog, a group
based in Santa Monica, Calif.
Court said the double-digit increase following its earlier hike so
closely shows the need for a law that gives regulators "the power to say
no" to rate increases from insurers making "too much" money.
A survey by the nonprofit Kaiser Family Foundation found that recent
individual insurance premium hikes requested by insurers have averaged
Associated Press Writer Shaya Tayefe Mohajer contributed to this report
from Los Angeles.