WellPoint to raise some Calif. premiums 39%
INDIANAPOLIS (AP) — Health insurer WellPoint is blaming the Great Recession and rising medical costs for its planned 39 percent rate increase for some California customers of its Anthem Blue Cross plan.
But Health and Human Services Secretary Kathleen Sebelius isn’t buying the explanation proffered in a letter delivered to her Thursday.
Sebelius said “it remains difficult to understand” how premium increases of that size can be justified when WellPoint Inc. reported a $4.75 billion profit in the last quarter of 2009. She also noted that the premium increases are 10 times higher than the increase in national health-care costs.
President Barack Obama has seized on the premium hikes in California as an ill omen of what will happen around the country if lawmakers fail to enact health-care- overhaul legislation. “If we don’t act, this is just a preview of coming attractions,” he said at a press conference Tuesday.
Brian Sassi, the head of WellPoint’s consumer business unit, said in the letter to Sebelius that because of the weak economy, healthy people increasingly are dropping coverage or buying cheaper plans. That reduces the premium revenue available to cover claims from sicker customers who are keeping their coverage.
The result was a 2009 loss for the unit that sells individual policies to people who don’t get insurance through their employers, he said. Higher rates for this group, which accounts for about 10 percent of Anthem’s 8 million customers in California, are needed to cover the shortfall expected from the continuation of that trend, according to the letter.
“When the healthy leave and the sick stay, that is going to dramatically drive up costs,” Sassi said in an interview. He declined to specify the size of the unit’s loss.
Sassi told Sebelius that insurance costs also continue to rise because medical prices are increasing faster than inflation, and people are using more health care. That use increase is driven by an aging population, new treatments and “more intensive diagnostic testing,” he wrote.
WellPoint is the largest publicly traded health insurer based on membership and is a dominant player in the individual-insurance market in California.
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