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California Insurer's Rate Hike Becomes Rallying Point For Health Care Reform

Christina Bellantoni | February 15, 2010, 9:09AM

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President Barack Obama

2010 elections, Anthem Blue Cross, Barack Obama, Health Care, Kathleen Sebelius

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Anthem Blue Cross' proposed 39 percent rate increases in California have become a new rallying point for the Obama administration and Democrats eager to get health care reform across the finish line.

The issue gives President Obama and Democrats a new enemy that can help drive home the need to fix the health care system, and they won't be letting up any time soon, administration and Congressional sources tell TPMDC.

There will be Congressional hearings this month and Obama has held it up as an example.

Already they have seen results, with Anthem agreeing to delay the hikes until May.

MoveOn.org and Americans United for Change have flagged the rate hikes for members and Democrats are trumpeting a Los Angeles Times editorial that says the increases are a new boost for reform efforts.

On a conference call Friday afternoon to announce major government funding for electronic medical workers, I asked Health and Human Services Kathleen Sebelius about WellPoint's response to questions about the increases, which you can read here.

She told me she has "some degree of skepticism" about a company with profits of $2.7 billion in the fourth quarter alone needing to impose rate hikes on 800,000 customers "so they can keep their profit margins going."

She added that WellPoint's two top executives were paid just under $10 million each in salary.

"There are a number of underlying questions about what is going on," Sebelius said.

She said both health care reform measures passed by the House and Senate would enhance the federal government's authority to investigate such increases, as well as require more justification of how much money from premiums goes toward health care compared with overhead, advertising and salaries.

The White House even used it to underscore the urgency of passing the final bill in its invitation for members of Congress to attend a Feb. 25 health care summit.

WellPoint defended the increases in a detailed letter to Sebelius by blaming rising medical costs and the economic recession.

WellPoint said in their response to Sebelius that most of Anthem's customers will not see such a dramatic increase, with the average price hike being 24 percent starting next month.

According to the Associated Press, based on the size of its membership, WellPoint is the largest publicly traded health insurer. The company operates Blue Cross and Blue Shield plans in 14 states and Unicare insurance plans in several others.

"Reform will end the worst insurance company practices and put doctors and patients -- not insurance companies -- in charge of medical decisions. If we fail to implement reform, insurance companies will continue to prosper while families will continue to struggle," Sebelius said in response to WellPoint's letter.

"[I]t's time to turn up the heat," MoveOn told members in an email, calling the rate hikes "yet another powerful example of how badly broken our health care system is and how desperately we need to hold Big Insurance accountable for exploiting their customers."

MoveOn used the issue to collect signatures on a petition to push reform.

Tom McMahon, acting executive director of Americans United for Change said the hikes make it "gut check time for Members of Congress who are still reluctant to support health insurance reform or are actively trying to kill it."

AUC sent emails into wavering Democrats' districts and said it is time to end the politicking on health care reform.

"Congress needs to act very quickly before other insurance companies follow suit and start demanding massive rate increases - taking full advantage of their virtual monopoly status and shaking down working families for every dime they can get," McMahon said.

An AP investigation showed that several states are expecting similar hikes.

As we have reported, the Energy and Commerce Committee has asked CEO Angela Braly to submit internal communications, including email, about the rate hike. They also request internal presentations relating to the California increases. They want the documents by Friday.

The committee also asked Braly to submit in advance of the Feb. 24 hearing a table detailing WellPoint revenue, insurance claims, sales, general and administrative expenses and profits from 2005 through 2008. Also requested were the detailed rates and increases proposed in California from Jan. 1, 2009 through the end of 2010.