WellPoint Executive Defends Premium Increases At Congressional Hearing

In a congressional hearing Wednesday, an insurance company executive justified proposed premium increases and warned "that pending legislation" could make the problem of high medical costs worse. "The executive, Angela F. Braly, president of WellPoint, made the comments in testimony prepared for a hearing of the House Energy and Commerce Committee," The New York Times reports. "Anthem Blue Cross, a unit of WellPoint, recently informed subscribers in California that premiums for individual insurance policies would rise an average of 25 percent, with some rates going up as much as 39 percent." Braly told the committee that raising the premiums was "not something we wanted to do," but that "we believe this was the most prudent choice, given the rising cost of care and the problems caused by many younger and healthier policyholders dropping or reducing their coverage during tough economic times." She said the company expects hospital costs in California to grow more than 10 percent and pharmacy costs to grow 13 percent (Pear, 2/24).

The Seattle Times: "Rep. Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee, charged that the real story wasn't one of higher costs. 'The thousands of pages of WellPoint documents we have reviewed tell another story,' he said. 'They tell a story not about costs, but about profits.'" Republicans also were critical of WellPoint. The "panel's top Republican, Texas Rep. Michael Burgess, asked why WellPoint asked for such a big increase. 'You had to know this was going to be trouble,' he told Braly. 'A 39 percent rate increase? In this climate?'" (2/24).

The Los Angeles Times: "Lawmakers, citing internal documents from WellPoint Inc., said the company had sought to inflate individual policyholders' premiums to counteract anticipated concessions to state regulators." But WellPoint said the company's profits were modest. "Braly said WellPoint's individual-policy business lost money in 2009 and was expected to earn less than a 2% profit in 2010. … In the House subcommittee hearing, Democrats displayed pictures of lavish resorts used by WellPoint for getaways and grilled Braly about executive pay, including her own salary of $1.1 million and stock compensation valued at $8.5 million last year" (Simon and Helfand, 2/25).

The Wall Street Journal: "The issue of sharp price jumps isn't going away, as evidence mounts that double-digit percentage increases aren't unique to California. On Tuesday, Sen. Charles Grassley, R-Iowa, asked Wellmark Blue Cross Blue Shield, a nonprofit in Iowa and South Dakota, to explain premium jumps of up to 22%. A spokesman said the company recognized the increases were difficult for customers but that rising medical costs necessitated them" (Johnson, 2/25).

NPR, on comments from participants at the hearing: "This hearing could not come at a better time. It provides a frightful reminder that unless Congress and the administration acts, Americans across the country will continue to experience large premium increases and will be priced out of the market," said Rep. Bart Stupak, who chairs the Oversight and Investigations panel of the committee (Welna, 2/24).

San Jose Mercury News: "Despite the firestorm of criticism, Anthem representatives said this week they plan to move ahead with the rate increase … for about 800,000 Californians enrolled in individual plans, as opposed to group plans provided by employers. (California) State Insurance Commissioner and gubernatorial candidate Steve Poizner is reviewing the proposed rate hike but is mostly powerless to stop it" (Zapler, 2/24).

The Associated Press/Washington Times: Health and Human Services Secretary Kathleen Sebelius has asked the heads of five major health insurers to meet with her next month to explain rising premiums. "Mrs. Sebelius wrote to the chief executives of UnitedHealth Group, WellPoint, Aetna, CIGNA and Health Care Service Corp. She asked them to come to a meeting March 3 on recent rate hikes. 'I hope this meeting will provide an opportunity to discuss why your premiums are climbing and how health insurance reform can bring down health care costs and fix our broken health insurance system,' she wrote" (Fram and Werner, 2/25).

ABC News: In addition, a "study released today by the Center for American Progress Action Fund showed WellPoint, which insures more Americans than any other company, is pushing double-digit premium hikes in 11 states across the country. … [President Barack] Obama, following a suggestion by Sen. Dianne Feinstein, D-Calif., has proposed giving the Health and Human Services secretary the power to block an insurance company's premium increases if they don't meet certain criteria. The proposal would have HHS yield to local officials in the 27 states where insurance commissioners already have the power to regulate premium hikes" (Khan, 2/24). 

This is part of Kaiser Health News' Daily Report - a summary of health policy coverage from major news organizations. The full summary of the day's news can be found here and you can sign up for e-mail subscriptions to the Daily Report here. In addition, our staff of reporters and correspondents file original stories each day, which you can find on our home page.