Congress Wants WellPoint to Explain California Rate Hikes

By Sean P. Carr, Washington Correspondent
A.M. Best
February 17, 2010

A congressional committee wants WellPoint, Inc. to explain rate hikes of up to 39% for individual health insurance policies carried by its Anthem Blue Cross subsidiary in California.

The U.S. House Subcommittee on Oversight and Investigations asked WellPoint President and Chief Executive Officer Angela Braly to appear before a Feb. 24 hearing. In a joint letter to Braly, House energy and Commerce Committee Chairman Henry Waxman, D-Calif., and subcommittee chairman Bart Stupak, D-Mich., also requested data from WellPoint, including "all internal communications, including e-mail, to or from senior corporate management relating to the company's decision to increase premium rates in California in the individual health insurance market."

California Assembly Health Committee Chairman Dave Jones, a Democratic candidate for insurance commissioner, scheduled his own hearing on health care premium increases for the day before (BestWire, Feb. 16, 2010). The rate increases average 25%.

At the request of California Insurance Commissioner Steve Poizner, Anthem agreed to delay the rate increases for two months, until May 1, to allow for an actuarial review of the proposal and the insurer. Poizner said he wants independent actuaries hired by the department to ensure Anthem pays out at least 70 cents of each premium dollar received for benefits, as required by California law (BestWire, Feb. 16, 2010).

Anthem is primarily regulated by California's Department of Managed Health Care, but Poizner said he is asserting his authority over certain health insurance plans offered by Anthem. The insurance department does not have prior approval over rates, but he can require Anthem to justify its actions, he said (BestWire, Feb. 10, 2010).

WellPoint (NYSE: WLP) earned $2.7 billion in the fourth quarter of 2009, including about $2.2 billion, after-tax, from a gain on the sale of its NextRx pharmacy benefit management subsidiaries. The most recent financial reports have also indicated a decline in medical enrollment to about 33.7 million members, a decrease of 1.4 million (BestWire, Feb. 8, 2010).

Attempts to reach WellPoint for comment were unsuccessful.

Anthem and most of WellPoint Health Networks Group's insurers have current Best's Financial Strength Ratings of A (Excellent).

Shares of WellPoint Inc. were trading at $59.77 on Feb. 17, up 2.24% from the previous close.

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