Anthem rate hike reignites health reform push

A move from the WellPoint-owned company to hike premiums in California got the attention of reform advocates, including the White House.

By Emily Berry — Posted March 1, 2010

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Anthem Blue Cross, WellPoint's subsidiary in California, in January began sending most of its 800,000 individual subscribers notice that they would be paying more -- up to 39% more -- for coverage as of March 1. Over the next few weeks, that notice became Exhibit A in the case for refocusing on health system reform.

"The health reform debate had been conducted in a very abstract way, and this particular case reminded many people of the dangers of not reforming health care," said William Dow, PhD, associate professor of health economics at the University of California, Berkeley, School of Public Health.

Weeks of criticism of Anthem culminated with President Obama making federal regulation of rate hikes a key point in his own proposal for health care system reform.

Soon after the increase made news, Health and Human Services Secretary Kathleen Sebelius demanded an explanation from WellPoint. It wasn't her first time facing off with Anthem: In 2002, as Kansas insurance commissioner, she blocked the company's planned acquisition of Blue Cross and Blue Shield of Kansas.

After rejecting WellPoint's initial explanations and publicly decrying its recent record profits, Sebelius released a report Feb. 18 highlighting the California hike and recent rate increases in individual markets elsewhere. Those included increases by both for-profit and nonprofit insurers in Connecticut, Michigan, Oregon, Rhode Island and Washington.

President Obama followed by opening his weekly radio address Feb. 20 with a description of the Anthem rate hike, and why it pointed to the need for continued health reform talks. "The status quo is good for the insurance industry and bad for America. And as bad as things are today, they'll only get worse if we fail to act."

On Feb. 22, Obama announced a new plan for health system reform that included giving the federal government power to block future health insurance rate increases, potentially superseding decisions made by state insurance commissioners.

Meanwhile, WellPoint executives insisted in statements to American Medical News, Sebelius and others, that the rate hike reflected underlying costs of care. Coupled with younger, healthier consumers opting out of buying insurance, this created a risk pool of older, sicker patients.

At the request of California Insurance Commissioner Steve Poizner, WellPoint delayed the rate increase in California from March 1 to May 1 to allow a third party to review its medical spending record.

WellPoint President and CEO Angela Braly appeared Feb. 24 before the House Energy & Commerce Subcommittee on Oversight and Investigations to discuss the rate hikes. She reiterated the company's stance that underlying health costs and a deteriorating risk pool -- not profits -- were at the heart of the increases.

However, a report put together by the Democratic majority staff noted that WellPoint internal documents showed executives discussing profit targets for California as it formulated the rate increases, and that it padded its rate increase by five percentage points "to counteract anticipated concessions to state regulators concerning the size of its premium increases."

Sebelius on Feb. 24 wrote chief executives of WellPoint, UnitedHealth Group, Aetna, Cigna and Health Care Service Corp., a nonprofit that owns Blues plans in four states. Sebelius asked them to meet with her March 3 to discuss recent rate hikes. Leaders of the National Assn. of Insurance Commissioners also were invited. None had responded to the invitation by this article's deadline.

In defending the industry, Karen Ignagni, president and CEO of the health insurance trade group America's Health Insurance Plans, along with WellPoint representatives, repeatedly cited "underlying health costs" as the driver of health insurance premiums. Ignagni cited cases of hospitals and doctors asking insurers for 40% to 50% increases in payment rates this year.

AMA President J. James Rohack, MD, a cardiologist from Bryan, Texas, rejected that argument, pointing to figures published in January in Health Affairs that showed the growth of medical spending in 2008 declined to the slowest pace in 48 years.

Dr. Rohack said the individual market reflects many of the underlying problems with the larger health system, particularly insurance market consolidation. "When they become market-dominant, they can dictate whatever price they want."

AHIP held a Feb. 22 teleconference to respond to Obama's health reform proposal. Ignagni defended the current state regulatory system, which gives insurance commissioners responsibility for ensuring that health plans remain financially viable while also considering consumers' welfare.

She criticized rate regulation, calling it the same as addressing only the "retail" price of care. "To have a conversation that suggests we can only look at the price of the car in the dealer's lot, versus all the supply costs, doesn't make a great deal of sense."

But it's a conversation that showed no signs of quieting, even in WellPoint's headquarters state of Indiana. Days after a House hearing grilling Anthem over its proposed 21% average increase in that state, lawmakers there introduced legislation that would require insurers to disclose details on rate increases, specifying what would be spent on administrative costs versus medical care.

Even critics of health system reform proposals were unhappy with WellPoint. In a Feb. 15 interview on Fox Business Channel, later posted on several liberal blogs, host Stuart Varney admonished WellPoint vice president Brad Fluegel: "You handed the politicians red meat at a time when health care is being discussed. You gave it to them! ... I mean really, you couldn't see this coming?"

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The state rate debate

State and federal officials have sharply criticized Anthem Blue Cross' planned rate increase in California, but the WellPoint subsidiary is not the only health plan imposing or requesting double-digit rate increases. In some states, insurance commissioners can deny or lower requested rate increases. Here is a sampling of recent activity:

Plan: Anthem Blue Cross (formerly Blue Cross of California), a subsidiary of Indianapolis-based WellPoint
Proposed rate increase: Average of 25%, maximum of 39%
Effective: May 1 (pushed back from March 1 at state's request)

Plan: Maine's Anthem Blue Cross and Blue Shield, a WellPoint subsidiary
Proposed rate increase: Average of 22.9%
Effective: July 1, pending approval from state insurance commissioner

Plan: Regence BlueCross BlueShield of Oregon
Proposed rate increase: Average of 25.3%
Effective: April 1, pending approval from state insurance commissioner

Plan: Blue Cross & Blue Shield of Rhode Island
Proposed rate increase: 10.2%; amended to 9.5%; knocked down to 6.1%
Effective: April 1

Source: State insurance department rate filings and hearing notices

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Role of insurance commissioners

In reaction to Anthem Blue Cross' plan to raise premiums for individual customers, state and federal policymakers have called for California to pass regulations giving its insurance commissioner authority to deny rate increase requests. Commissioners in 27 states have "prior approval" authority for premium increases in the individual/non-group market, according to the National Assn. of Insurance Commissioners.

States with "prior approval" authority: Alaska, Arkansas, Colorado, Connecticut, Florida, Hawaii, Indiana, Iowa, Maryland, Massachusetts, Minnesota, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia, Washington, West Virginia

Note: Alaska only requires prior approval if the change is greater than 10%; Hawaii's prior approval requirement is for managed care plans only.

Source: NAIC data as of February 2009

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Regulator cites 700 violations

WellPoint-owned Anthem Blue Cross violated California consumer protection laws more than 700 times over the course of four years, state Insurance Commissioner Steve Poizner announced Feb. 22.

In a review of complaints against Anthem made between Jan. 1, 2006, and Dec. 31, 2009, the department found 732 instances of the company committing "unfair or deceptive acts or practices," according to allegations filed.

Of those, 277 were for failures to pay claims within 30 days as required by law and 25 were for failure to pay interest on claims paid late. Another 22 of the 732 violations were for offering members "unreasonably low" settlements for claims, the filing said.

WellPoint could face a maximum fine of $10,000 per violation deemed "willful," for a potential total of more than $7 million.

The company said it had not seen Poizner's statement.

"We take the issues raised by Commissioner Poizner very seriously," WellPoint spokeswoman Kristin Binns said in a written statement. "While this review represents a small fraction of those claims. it is nonetheless very important to us to make sure we take any corrective action that may be necessary."

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External links

"Insurance Companies Prosper, Families Suffer: Our Broken Health Insurance System," a Dept. of Health and Human Services report on rate increases for individual health insurance, Feb. 18 (link)

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