February 14, 2010 in Nation/World

Insurance company puts off rate increase

State, media scrutiny spurs delay, allowing data review
Linda A. Johnson Associated Press
 

Health insurer Anthem Blue Cross will postpone its much-criticized plan to raise rates for some California residents who buy insurance on their own, after reaching a deal Saturday with state regulators.

Anthem’s planned rate hike, which the state estimates would affect about 700,000 customers, averaged 25 percent and would have been as high as 39 percent for some.

Anthem Blue Cross of California, based in Thousand Oaks, agreed to postpone the increase from March 1 until May 1 so California could have outside experts review the company’s complex and detailed plan filing, including data on the medical costs it expects to incur.

The California Department of Insurance had been working with Anthem since mid-November to get more information about the increase, Insurance Commissioner Steve Poizner said. He wanted to have experts comb through the company’s figures to confirm the new rates comply with a 2006 state law that insurers spend 70 cents of every premium dollar on medical care.

“Medical cost inflation in California is in the 10 to 15 percent range, so I have a healthy skepticism how they can get to 39 percent” and comply with the law, Poizner said.

If they don’t, he said, he will direct the company to reduce its prices, “or I will take away their license to sell insurance” in California.

He officially requested the delay on Monday, but said Anthem stuck to its position that the individual insurance plan had lost money last year and the rate increases were justified – until Saturday. The change of heart came after a week of extensive media reports about the rate hikes, harsh criticism from the Obama administration and two congressmen scheduling a hearing to look into the rates on Feb. 24.

“They did the right thing today,” Poizner said during a conference call. “These are huge, massive rate increases, very concerning to me and my team.”

Anthem, a subsidiary of insurance giant WellPoint Inc. of Indianapolis, said its proposed rates reflect anticipated medical costs.

“They are actuarially sound and in full compliance with all requirements in the law,” said Brian Sassi, president of Anthem Blue Cross of California.

The company has blamed the increased rates on the recession, rising medical costs and more healthy people dropping out of the plan, leaving fewer premium dollars to cover costs. It has insisted that the situation shows the need for a health care overhaul that requires everyone to have health insurance.

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