Sebelius Lashes Out at Anthem for Premium Increases

Health and Human Services Secretary Kathleen Sebelius is demanding that Anthem Blue Cross publicly justify its decision to raise member premiums by as much as 39%.

In a letter to Leslie Margolin, president of Anthem Blue Cross, California's largest for-profit insurer, Sebelius bashed the premium increases at a time when WellPoint, Anthem's parent company, "earned $2.7 billion in the last quarter of 2009."

Anthem Blue Cross, which has 800,000 individual insurance members, recently told individual members that it is increasing premiums on March 1. The Los Angeles Times reported last week that those premium increases were as high as 39%.

"As we continue the healthy insurance reform debate in Washington, this announcement reminds us that too many Americans can be left with unaffordable insurance each time the rates or rules change in the private market," Sebelius said. "It's clear that we need  health insurance reform that will give American families the secure, affordable coverage they need."

In her letter, Sebelius said the premium increases are up to 15 times faster than inflation and could make healthcare unaffordable for hundreds of thousands of Californians.

Sebelius asked for information not only about premium increases, but the insurer's medical loss ratios. Individual insurance usually has a lower medical loss ratio than the group market because there is more costs associated with marketing and customer service in the individual market.

"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 to medical care versus the percent that is used for administrative costs. Policyholders in the individual market deserve to know if their premium increase would be invested in better medical care or insurance company overhead costs like salaries, profits, and advertising," wrote Sebelius.

In response to Sebelius' letter, Anthem Blue Cross issued a statement: "It is important to note that individual medical insurance premiums do not reflect an individual member's personal claims experience. Therefore, as medical costs increase across our member population, premium increases to the entire membership pool result. Unfortunately, in the weak economy many people who do not have health conditions are foregoing buying insurance.

"This leaves fewer people, often with significantly greater medical needs, in the insured pool. We regret the impact this has on our members. It highlights why we need sustainable healthcare reform to manage the steadily rising costs of hospitals, drugs and doctors.

"As such, it is important to go back to the beginning and get healthcare reform done right. At the same time, we are engaging with a broad range of key stakeholders across California to discuss the state's individual insurance market and share ideas on how we can collectively partner on meaningful change," said Anthem officials.