U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius has sent a letter to Anthem Blue Cross, asking that the company publicly justify its decision to raise premiums for its California customers by as much as 39 percent on March 1.

Secretary Sebelius' letter comes shortly after WellPoint, Inc.'s California affiliate, Anthem Blue Cross (Anthem) notified some policy-holders that rates would increase. The company is California's largest for-profit insurer.

Sebelius addressed her letter to Leslie Margolin, President of Anthem. In her letter, Sebelius said that unaffordable insurance is already a significant problem in the U.S., and that she was "disturbed" to learn of the planned premium hike. "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," Sebelius stated.

Sebelius then pointed out that Anthem's strong financial position (earning $2.7 billion in the last quarter of 2009) makes the rate increases "even more difficult to understand." Sebelius went on to ask for reasoning behind the decision to raise premiums, saying, "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."

As Sebelius had mentioned, California Insurance Commissioner Steve Poizner has also sent a letter to WellPoint executives requesting that the rate increase be postponed so that the California Department of Insurance can perform an independent actuarial review of the proposal. In his letter, Poizner also addressed the financial impact on policy holders, and how the agency has already received complaints from Californians on how devastating the rate increases would be.

Poizner then explained his planned response to the rate increase: "At my direction, the Department is retaining an independent actuary to analyze Anthem's proposed rate increases. The actuary will carefully evaluate Anthem's submissions to ensure that Anthem's actuarial assumptions are justified and that Anthem pays out at least 70 cents of each premium dollar received for benefits, as required by California law."

Poizner has asked that the rate increases be postponed until May 1, 2010, and that the company notify the Department by February 15 if it will do so. He also stated that if the independent actuary does not find that Anthem's rates were justified, he will take all legal action available to stop the rate increase.

Adapted in part from press releases by HHS, the CA Dept. of Insurance.

Read More:
Secretary Sebelius' letter: http://www.hhs.gov/news/press/2010pres/02/20100208c.html

Commissioner Poizner's letter: http://www.insurance.ca.gov/0400-news/0100-press-releases/2010/release020-10.cfm

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