Lawmakers Accuse Wellpoint, Parent Company Of Anthem Blue Cross, Of Profiteering

By Richard.Simon
Los Angeles Times
February 25, 2010, 2010

Feb. 25--REPORTING FROM LOS ANGELES AND WASHINGTON -- Congressional Democrats on Wednesday accused the parent company of Anthem Blue Cross of putting profits ahead of policyholders, saying the giant insurer padded its proposed rates while lavishing generous salaries and benefits on top executives.

Lawmakers, citing internal documents from WellPoint Inc., said the company had sought to inflate individual policyholders' premiums to counteract anticipated concessions to state regulators.

WellPoint officials denied they had padded premiums and said the company's profits were modest.

The rate hikes of as much as 39%, set to take effect May 1 for many of Anthem's 800,000 California customers with individual policies, have been the focus of vocal criticism by policyholders, consumer groups, regulators, members of Congress and the Obama administration.

The hearing Wednesday was held by the House Energy and Commerce Committee's subcommittee on oversight and investigations.

Rep. Bart Stupak (D-Mich.), the subcommittee chairman, grilled two WellPoint executives called to testify, saying the company's own documents show that WellPoint "sought inflated premium increases as a negotiating tool" with California regulators.

Rep. Henry A. Waxman (D-Beverly Hills) added: "You are asking for more than you need because you've built in a large cushion. You're raising your rates far above what is necessary. You're trying to squeeze every dollar of profit you can out of policyholders in California and across the nation."

WellPoint Chief Executive Angela F. Braly disputed Waxman's charge. She noted that California Insurance Commissioner Steve Poizner hadn't objected to the premium increases, notice of which was filed by WellPoint on Nov. 7, until after the issue surfaced in The Times. She said state regulators had 30 days from the date of the rate filing to object.

Braly and WellPoint's chief actuary, Cynthia Miller, said the average 25% rate hikes were necessary to counter rising medical costs and an exodus of younger and healthier policyholders who are dropping or reducing their coverage.

Braly said WellPoint's individual-policy business lost money in 2009 and was expected to earn less than a 2% profit in 2010.

"It was not a cushion in the rate that was filed," Braly said of the proposed rate increases. "It is always a challenging issue to raise rates. Our goal is to continue to serve members and have more members."

Democrats were eager to highlight the rate increases on the eve of a summit Thursday on healthcare legislation, hoping to give new momentum to the stalled overhaul. President Obama has proposed creating a government panel to review premium fairness as part of a larger healthcare package.

The uproar over Anthem's proposed rates appeared to be gaining momentum, with scrutiny possibly spreading to other insurers.

On Wednesday, Senate leaders asked WellPoint and five other large insurance companies for detailed explanations about rate hikes.

Sen. Max Baucus (D-Mont.), chairman of the Senate Finance Committee, and its ranking Republican, Sen. Charles E. Grassley of Iowa, sought the information from WellPoint, Aetna, Health Net Inc., Blue Shield of California, Kaiser Permanente and UnitedHealth Group Inc.

"Uncontrolled premium increases lead to soaring profits for insurance company CEOs at the expense of consumers," Baucus said in a statement.

Sen. Jeanne Shaheen (D-N.H.) also demanded an explanation for WellPoint's planned rate increases in her state, despite the company's high profits. Health and Human Services Secretary Kathleen Sebelius invited the chiefs of WellPoint, UnitedHealth, Aetna, Health Care Service Corp. and CIGNA HealthCare Inc. to a March 3 meeting in Washington to discuss insurance premiums.

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.

Company documents obtained by congressional investigators showed the company paid 39 company executives $1 million or more in 2008 and spent more than $27 million for 103 executive retreats in 2007 and 2008. Company officials said some of the retreats were attended by insurance agents and brokers.

The subcommittee's top Republican, Rep. Michael C. Burgess of Texas, also asked why WellPoint asked for such a big increase now.

"You had to know this was going to be trouble," Burgess told Braly. "A 39% rate increase? In this climate?"

Braly said WellPoint appreciated the burden of rising premiums but that it was unfair to hold health insurers responsible for the underlying cause -- soaring costs of doctors, hospitals and drug companies, among others.

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