Anthem Asked To Justify Insurance Rate Hike

fromKQED

An investigation in California over dramatic health insurance increases is spurring a federal inquiry. Two congressional committees have asked executives from WellPoint, the parent company of Anthem Blue Cross of California, to explain why the company is raising premiums by as much as 39 percent for some customers.

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STEVE INSKEEP, host:

Let's come back to this country now, where a California insurance company is raising premiums by as much as 39 percent for some customers. Now Congress wants to know why. Two congressional committees have asked executives from WellPoint, the parent company of Anthem Blue Cross of California, to explain the sharp increase.

From member station KQED in San Francisco, Sarah Varney reports.

SARAH VARNEY: A spokeswoman for Anthem Blue Cross would not say how many of its 800,000 individual policyholders in California would see their rates increase. But in a written statement, the company says the rate hikes are justified. The company says the recession has forced many healthy people to drop insurance, leaving sicker people with more expensive medical needs in the insured pool.

Steven Lindsay, a lobbyist for the California Association of Health Underwriters, says Anthem's explanation makes sense. If healthy people lose their jobs, they're more likely to drop health coverage, but...

Mr. STEVEN LINDSAY (Lobbyist, California Association of Health Underwriters): Folks who are sick are almost always willing to go into their savings or sometimes even their pension plans to make withdrawals to keep their health insurance.

Mr. WILL DOW (Health economist, UC Berkeley): It would need to be a massive change in their risk pool in order to cause a 30 or 40 percent increase in premiums.

VARNEY: That's Will Dow, a UC Berkeley health economist and former Bush administration advisor. He says, while other insurers are raising rates, he suspects the rate hikes are part of Anthem's business strategy to shake out money-losing customers.

Mr. DOW: The common scenario when they have a risk pool which has evolved to become disproportionately sick, they will raise the rates substantially, healthier people will drop out of that pool, and they can get re-enrolled in another insurance product and stay with the company, but the very sickest people will end up disappearing from the insurance pool as the rates get raised completely out of reach. So this is a typical cherry-picking and lemon-dropping scenario that Anthem, in particular, has been very aggressive about using.

VARNEY: Anthem Blue Cross has been sharply criticized over the years by state regulators for its aggressive practices. For its part, the company says rising cost from hospitals, drugs and doctors are also to blame for the premium increases.

For NPR News, I'm Sarah Varney.

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