On Monday, HHS Secretary Kathleen Sebelius sent a letter asking Anthem Blue Cross of California to explain a dramatic rate increase scheduled to go into effect next month, AP/USA Today reports.
The insurer recently informed many of its approximately 800,000 individual policyholders that premiums would increase by as much as 39% on March 1. Anthem also informed members that it might start adjusting premiums more often than once a year (Werner, AP/USA Today, 2/9).
In a letter to Anthem President Leslie Margolin, Sebelius wrote that the company has a "responsibility to provide a detailed justification for these rate increases to the public." Sebelius said Anthem should disclose what share of its premiums goes toward administrative overhead, advertising, medical claims and profits.
Sebelius' letter noted that Anthem's rate increases were 15 times greater than inflation rates. She also pointed out that Anthem's parent-company WellPoint saw profit climb to $2.9 billion during the last quarter of 2009 (MacGillis, Washington Post, 2/8).
Anthem Response
On Monday afternoon, Anthem sent a response explaining that the rate increase stemmed from the economic downturn. The insurer said the recession led many members to suspend their policies, thus creating a smaller pool of beneficiaries.
Anthem noted that beneficiaries who retained coverage tend to have greater health needs than those who dropped benefits (Colliver, San Francisco Chronicle, 2/9).
The insurer said it would respond to Sebelius' inquiry as soon as possible.
Poizner Asks for Delay
Also on Monday, California Insurance Commissioner Steve Poizner (R) sent a letter asking Anthem's parent company WellPoint to delay the controversial rate hike until May 1, pending an investigation from an independent actuary to be appointed by the state (Helfand, Los Angeles Times, 2/9).
California law requires insurers to spend 70% of premiums on medical claims.
In his letter, Poizner said he would launch legal action if the independent actuary finds that the company is not meeting the standard (Calvan, Sacramento Bee, 2/9).
An Anthem spokesperson said the company is reviewing Poizner’s request (Los Angeles Times, 2/5).