Obama Administration Demands Justification For Blue Cross Rate Increase

The Obama administration has been decrying a California insurer's 39 percent rate hike as an example of why health care reform is so important, and today they put some muscle behind the complaints.

Health and Human Services Secretary Kathleen Sebeilus wrote a letter to Anthem Blue Cross today insisting they have an obligation to explain why the "extraordinary" increases are justified.

Sebelius writes: "Your company's strong financial position makes these rate increases even more difficult to understand. As you know, your parent company, WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone."

An Anthem spokeswoman has not returned our calls.

The full letter after the jump.

February 8, 2010

Leslie Margolin
President, Anthem Blue Cross
Delivered Via Fax

Dear Ms. Margolin,

One of the biggest pressures facing families, businesses and governments at every level are skyrocketing health insurance costs. With so many families already affected by rising costs, I was very disturbed to learn through media accounts that Anthem Blue Cross plans to raise premiums for its California customers by as much as 39 percent. These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy.

Your company's strong financial position makes these rate increases even more difficult to understand. As you know, your parent company, WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone.

I believe Anthem Blue Cross has a responsibility to provide a detailed justification for these rate increases to the public. Additionally, you should make public information on the percent of your individual market premiums that is used for medical care versus the percent that is used for administrative costs. Policy holders in the individual market deserve to know if their premium increases would be invested in better medical care or insurance company overhead costs like salaries, profits, and advertising. I am aware that the State of California is investigating this matter, and urge Anthem Blue Cross to cooperate fully. In the meantime, I will be closely monitoring the situation.

At a time when health care costs are a critical threat to families as well as the nation's economy, I hope you appreciate the urgent nature of this request. I look forward to your prompt reply.

Sincerely,


Kathleen Sebelius
Secretary of Health and Human Services

Late update:

Anthem Blue Cross sends along the following statement:

Anthem Blue Cross in California has received the letter from Secretary Sebelius. We will reply to her promptly. It is important to note that individual medical insurance premiums do not reflect an individual member's personal claims experience. Therefore, as medical costs increase across our member population, premium increases to the entire membership pool result. Unfortunately, in the weak economy many people who do not have health conditions are foregoing buying insurance. This leaves fewer people, often with significantly greater medical needs, in the insured pool. We regret the impact this has on our members. It highlights, why we need sustainable health care reform to manage the steadily rising costs of hospitals, drugs and doctors . As such, it is important to go back to the beginning and get health care reform done right. At the same time, we are engaging with a broad range of key stakeholders across California to discuss the state's individual insurance market and share ideas on how we can collectively partner on meaningful change.