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Insurer Replies to Letter Requesting Justification for 39 Percent Rate Hike

Source: ABC News

Posted on 12 Feb 2010

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This morning, Anthem Blue Cross's Brian Sassi, President and CEO of the company's Consumer Business Unit, replied to the letter from Health and Human Services Secretary Kathleen Sebelius in which she asked the California insurance company this week to "provide a detailed justification" for their 39 percent premium hike.

“We share the concern raised by you and others,” Sassi writes in a letter to the Secretary, “and appreciate the opportunity to explain why rates – which reflect anticipated medical costs – are increasing substantially for certain individual members.”

As summarized by Anthem Blue Cross – the points they make to Sebelius’ inquiry are:

1. The rate increases being reported in the media relate only to the individual insurance market, which represents less than 10% of our California members.

2. Anthem operated at a loss in its individual business in California during 2009.

3. An independent actuarial firm examined our rates and concluded they are both sound and necessary, reflecting the expected medical costs associated with membership in these plans. They meet or exceed the medical loss ratio required by California law.

4. Our members have choice in coverage, and we work with them to find the best options for their needs. As a result, our products are very competitively priced when compared with other California plans, including our two largest not-for-profit competitors.

5. All health plans are in the same situation in trying to deal with the steadily increasing underlying medical costs in the delivery system, which are unsustainable.

6. A higher proportion of healthy individuals are choosing not to enroll, leaving an insured pool that utilizes significantly more services. This is why we need an effective personal coverage requirement.

7. Anthem's profit margin in California is in line with, or below, many of its competitors, including our two large not-for-profit competitors.

8. We are committed to California. We are the biggest participant in public programs for higher cost individuals with limited coverage options.

Sassi says the company understands that the premium hike “creates a challenge” to many of their members, but added, “it is important to know that our members often have a choice of coverage.

We will help our members understand their options by making available health plan advisors who work with the member to help ensure they understand their coverage options.”

President Obama in recent days have used this California insurance company as an example of why health care reform is so urgent.

“Just this week, there was a report that Anthem Blue Cross, which is the largest insurer in the largest state, California, is planning on raising premiums for many individual policyholders by as much as 39 percent,” Obama said on Tuesday from the White House briefing room, “If we don't act, this is just a preview of coming attractions. Premiums will continue to rise for folks with insurance; millions more will lose their coverage altogether; our deficits will continue to grow larger.”