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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 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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