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WellPoint Anthem Retreats From Its 39% Premium Hike Demand After 
Audit Reveals Bad Math  

Cheryl Clark, for HealthLeaders Media, April 30, 2010
WellPoint Inc., the parent company of Anthem Blue Cross, yesterday 
backed down from its 39% hike of health plan premiums for 800,000 
Californians after state officials unveiled an audit showing 
"numerous and substantial errors" in a filing Anthem said justified 
the increase.

The audit, conducted by Axene Health Partners LLC, showed that Anthem 
double counted "aging" as a projection of total lifetime loss ratio, 
and "overstated the initial medical trend used to project claims for 
September 2009 for known risk factors," said state Insurance 
Commissioner Steve Poizner.

According to the audit, Anthem made five errors, two of which were 
described as "material," and when corrected, would result in a 
population that was not as old or as sick, and presumably would incur 
much lower medical costs.  

"I'm pleased that California consumers will not face rate hikes of up 
to 39%," Poizner said in a statement yesterday. Poizner, who is 
running for governor, said he had ordered the outside review "because 
I was highly skeptical" of the assumptions the company was making in 
its request for so much more money from thousands in California's 
individual insurance market.  

Yesterday afternoon in a statement, Anthem Blue Cross said it would 
refile rates in the individual market in California.  

"We think it is in the best interests of our customers and those 
seeking insurance coverage in California to refile our rates, taking 
into consideration healthcare reform law and the most recent cost and 
utilization information available," said Brian Sassi, president and 
CEO of WellPoint's Consumer business unit. "Our goal is to make 
healthcare reform work for our members."  

The statement added, "By refiling our individual rate requests, we 
will also utilize updated and real-time medical utilization 
information as well as address inadvertent miscalculations related to 
the way in which we estimated our future medical costs in our initial 
filings." A spokesman could not be reached for further comment.  

The insurance plan's original proposal as well as findings in the 
Axene audit help to fuel political and consumer fury about what many 
believe is a widespread trend among for-profit health insurance 
companies to gouge  

Secretary of Health and Human Services Kathleen Sebelius also weighed 
in on Anthem's rate increase withdrawal.  

"Today's announcement is good news for the more than 800,000 
Californians who could have been hit with massive rate increases and 
gives them some much-needed temporary relief. Since these rate hikes 
were first announced, I have heard from countless Americans who have 
been stretched to the limit by high health insurance premiums.  

She continued: "This result was achieved because those who oversee 
the insurance industry on the state and federal levels heard these 
voices, held investigations, and demanded action." She said federal 
officials "will closely monitor the industry, and we will not 
hesitate to act to prevent exorbitant premium hikes."  

In California, Consumer Watchdog president Jamie Court said the 
report "should be Exhibit A in the case for making health insurers 
prove the need for premium increases to government agencies before 
the rates take effect. Americans will be required to show proof of 
health insurance by 2014 and insurance companies should be required 
to show that premiums they charge are reasonable."  

Without the audit, Court said, "this insurance company would have 
snuck an unreasonable increase by under the nose of regulators, and 
patients would have been priced out of their health insurance."  

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