Obama admin. demands justification for health insurer's 39 percent rate hike

Insurer spent nearly $9.5 million lobbying against health reforms; CEO's annual salary tops $10 million

It's an issue that strikes at the core of America's health reform debate: How much should one have to pay to ensure their health care needs are met?

Now take that price and inflate it by up to 39 percent -- just to get a feel for what it is like to be one of roughly 800,000 Anthem Blue Cross customers in California who hold individual policies.

The company said its dramatic rate hike would take effect on March 1.

State regulators almost immediately promised to investigate the increase. Then, on Monday, the Obama administration got involved.

In a letter faxed to Anthem Blue Cross, US Health and Human Services Secretary Kathleen Sebelius called for the insurer to publicly explain why it raised premiums.

"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," or 15 times faster than inflation, Sebelius wrote.

The rate hikes were "even more difficult to understand" in the light of soaring profits at Anthem Blue Cross's parent company, WellPoint Incorporated, Sebelius said.

WellPoint earned 2.7 billion dollars in the last quarter of 2009, she said, calling on the insurance company to "provide a detailed justification" for the increase.

Additionally, WellPoint CEO Angela Braly earns an annual salary of nearly $10 million and held nearly $2 million in stock options at the end of 2008. Additionally, WellPoint spent nearly $9.5 million on lobbying against health reforms in 2009, labor advocate group AFL-CIO noted in a recent release.

"As we continue the health insurance reform debate in Washington, this announcement reminds us that too many Americans can be left with unaffordable insurance each time the rates or rules change in the private market," Sebelius said.

Last month, plans to reform the US health care system hit a wall when the election of a Republican to the Senate Massachusetts seat long held by Ted Kennedy robbed the Democrats of their 60-vote supermajority in the Senate.

President Obama vowed during his campaign for the White House to reform health care and make coverage accessible to the 47 million Americans who currently do not have any, and to make coverage less of a financial drain on US workers.

"We understand and strongly share our members' concerns over the rising cost of healthcare services and the corresponding adverse impact on insurance premiums," the company said in a statement noted by The Los Angeles Times.

"Unfortunately, the individual market premiums are merely the symptoms of a larger underlying problem in California's individual market -- rising healthcare costs."

In a Monday response to Sebilius's letter, the insurer seemed to echo the oft-repeated Republican talking point that Obama's proposed health reforms must be scrapped and begun anew.

"We regret the impact this has on our members," the company said, according to The Washington Post. "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."

President Obama has said he does not want to start from scratch on his package of health reforms and plans to hold a televised health summit with Republicans on Feb. 25.

A recent Harvard study published by the American Journal of Public Health found that over 45,000 Americans die every year for lack of health insurance -- more than the number of Americans killed by kidney disease.

Sebelius's full letter follows.

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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

With AFP