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HHS Secretary Asks Insurer to Justify Rate Hike

February 8, 2010
Related Topics: Medical Benefits Law, Benefit Design and Communication, Health and Wellness, Latest News
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Kathleen Sebelius, secretary of the U.S. Health and Human Services Department, has called on Anthem Blue Cross of California to release financial data to justify its 39 percent increase in premium costs for California customers with individual policies. President Barack Obama cited the increase to bolster his case for health care reform. The rate increase does not apply to employer-provided plans.

In a letter dated February 8 and sent to Anthem Blue Cross president Leslie Margolin, Sebelius said she was “disturbed” to learn about the increase, which she said is 15 times greater than the rate of inflation and could make insurance unaffordable for hundreds of thousands of Californians.

“Your company’s strong financial position makes these rate increases even more difficult to understand,” the secretary stated, adding that WellPoint, Anthem's parent company, posted $2.7 billion in profits during the fourth quarter of 2009.

Sebelius also called on the company to make public its medical-loss ratio data, or the amount of premiums that is used for medical care versus the percentage used for administrative costs.

California law requires that insurers spend at least 70 cents of every premium dollar on medical care.

Last week, California Insurance Commissioner Steve Poizner instructed his department to hire an outside actuary to examine Anthem’s rates, adding that if the ratio is found to be excessive, “I will use the full power of my office to bring these rates down.”

An Anthem spokeswoman said that the company had been alerted to Sebelius’ letter through media accounts, but has yet to review it.

In a statement on its rate increase, Anthem said that the rising cost of care has forced the company to raise its premiums.

“It is important to note that premiums are expensive because the underlying healthcare costs are expensive,” the letter states.

Filed by Matthew DoBias of Modern Health Care, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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