Anthem Blue Cross executives are scheduled to testify Tuesday before a California legislative committee about an attempt to boost insurance premiums by up to 39 percent, a proposal that has become a flash point in the national debate over health care reform.
The rate hike by California's largest for-profit health insurer would affect the company's roughly 700,000 individual policy holders in the state.
The Obama administration has referenced Anthem's rate proposal frequently in its arguments for greater federal authority over premiums. On Monday, President Barack Obama put forward a national health care plan that would give the Department of Health and Human Services the authority to deny or limit substantial premium increases or demand rebates for consumers.
The state legislative hearing is the first public examination of the rate proposal, which the insurer announced in November.
On Wednesday, a U.S. House of Representatives committee will question executives from Anthem's parent company, WellPoint Inc. of Indianapolis, about its rate proposals.
The company has said it needs to increase premiums in part because younger, healthier people have been dropping health insurance coverage during the recession, leaving it with a pool of policyholders that is older and more dependent on health care services.
The latest increase would average 25 percent but could be as high as 39 percent for some customers who purchase individual policies. Anthem's remaining 7.3 million customers in California are covered by employer-sponsored plans and would not be affected, company spokeswoman Kristin Binns said.
Individual insurance plans cover about 30 percent of Californians, according to the state Department of Insurance. That is rising as more people lose employer-sponsored coverage.
After extensive media reports and pressure from state regulators, Anthem agreed earlier this month to postpone the start of the increase from March 1 to May 1.
In a Feb. 8 letter to Anthem president Leslie Margolin, U.S. Health and Human Services Secretary Kathleen Sebelius said she was disturbed by the proposed increase and called for the insurer to justify the need for such a significant hike.
Last week, her agency released a report condemning Anthem's recent actions. In it, Sebelius noted that profits for the country's 10 largest insurance companies rose 250 percent between 2000 and 2009 - 10 times faster than inflation.
WellPoint reported a $2.7 billion profit in the last quarter of 2009, according to the report.
The state insurance department lacks legal authority to stop rate increases but can complicate insurers' practices in other ways. The office has hired a consulting firm to review Anthem's rate proposal and determine whether it complies with a 2006 California law requiring insurers to spend 70 cents of every premium dollar on medical care.
"I have a healthy skepticism that the increase complies with the law," State Insurance Commissioner Steve Poizner said Monday.
Poizner said Anthem's 57 percent market share in California is evidence that state residents lack sufficient choice when it comes to choosing health insurance providers.
Deputy Insurance Commissioner David Link is scheduled to take part in Tuesday's hearing before the Assembly Health Committee. He will be joined by Margolin and numerous health insurance experts and consumer advocates.
The hearing is intended to help the Legislature develop policies to protect Californians from rate hikes like those proposed by Anthem, said the committee's chairman, state Assemblyman Dave Jones, D-Sacramento.
"A 39 percent rate increase on top of prior increases is simply unconscionable," he said in a statement Monday.
Anthem Blue Cross did not respond to a request for comment on the Tuesday committee hearing.
California isn't the only market facing premium hikes. In Maine, Anthem Blue Cross has asked for increases of about 23 percent this year for some individual policyholders.
In Michigan, Blue Cross Blue Shield, which is not part of WellPoint, requested approval for increases of up to 56 percent in 2009. State regulators ultimately approved an average increase of 22 percent.
Applications for rate increases in California are not made public until the insurance department officially acknowledges them. Poizner's spokesman, Darrel Ng, said the department has not acknowledged any significant rate increases by California's other health insurers.
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