The New Health Dialogue

Anthem Blue Cross, the largest health insurer in California, drew fire from all sides earlier this month when they announced premium hikes for individual policy holders by a whopping 39 percent. Health and Human Services Secretary Sebelius immediately wrote a letter demanding justification for the increase, and pointing out that Anthem’s owner, the for-profit insurer WellPoint, made $2.7 billion in profits last quarter.

Sebelius then released a report warning that such rate increases could become common in the absence of health reform. The Center for American Progress recently released a another report with similar findings. According to a recent survey by CAP, WellPoint plans to raise individual insurance premium rates by double-digit percentages in 11 states: California, Colorado, Connecticut, Georgia, Indiana, Maine, Nevada, New Hampshire, New York, Virginia, and Wisconsin. 

Health insurers say the rate increases are a response to external forces, and are necessary to prevent major profit losses in a down economy. WellPoint argued, according to the CAP report, that the recession caused fewer healthy individuals to stay enrolled in their health plans. This means there are more sick people in the insurance pool, using more costly services but not actually paying more for them. Insurers argue they are raising rates to compensate for this adverse selection.

However, Representatives Waxman (D-CA) and Stupak (D-MI) are questioning WellPoint's claim. Using data from WellPoint, they noted that the number of individual policy holders at Anthem had increased by seven percent. Waxman and Stupak called on WellPoint to further explain its policies. At a hearing this week, Waxman cited documents showing WellPoint corporate executives received salaries of over $1 million, and in 2008, the company spent $27 million dollars for 103 executive retreats.

“Corporate executives at WellPoint are thriving, but its policyholders are paying the price,” said Waxman in the Washington Post. According to a recent report from Health Care For America Now (HCAN), the nation’s largest insurers made $12.2 billion in 2009, despite the struggling economy. This represents a 56 percent increase in profits in just one year. At the same time, approximately 2.7 million Americans lost their health insurance coverage.

President Obama criticized the premium increases in California and echoed HHS Secretary Sebelius’s warning that things will only get worse across the nation if we fail to act. The status quo is “good for the insurance industry and bad for America,” he said in his weekly address. The president called for the creation of a Health Insurance Rate Authority to monitor and regulate health premium rates in his recently released health reform legislation.

The full report from CAP is available here.