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Anthem Blue Cross Reminds Us That You Can Never Have Enough Profits

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As a member of the Assembly Health Committee, I attended a recent informational hearing regarding Anthem Blue Cross's 39% recent rate hikes. These outrageous price increases are a startling and dramatic reminder of the need for comprehensive health reform.

Based on earnings reports and stock prices, it looks to me like, Anthem Blue Cross' parent company, Wellpoint, is doing fine. Shares are up, Wellpoint and its subsidiaries cover more than 30 million Americans and it is a successful, profitable company.

However, in the individual market, we've seen double-digit rate increases by Wellpoint subsidiaries and other companies. Apparently, sending $525 million back to the parent company in 2009 isn't good enough and rates have to go up. As indicated by Anthem Blue Cross during the hearing, these rate increases are not just happening in California. And, if you can believe it, this latest increase isn't even the highest yet, but it does seem to be pointing at a larger issue.

First, as we learned in 2008, Anthem Blue Cross tried to avoid costs associated with doing business in the individual market by improperly denying coverage or pulling coverage out from under critically ill people. That didn't work as Anthem Blue Cross had to pay $10 million to compensate policyholders and reinstate 1,770 patients whose coverage had been improperly denied.

In 2009 Anthem Blue Cross had to pay another million dollar fine and the company had to reinstate another thousand or so sick people they had illegally kicked off their plans.

Now, in 2010, according to the California Department of Insurance, Anthem Blue Cross regularly violates state laws by failing to promptly pay claims, failing to respond quickly to regulators during complaint investigations, misrepresenting facts or insurance policies to consumers, failing to pay interest on claims, making unreasonably low settlement offers, and dozens of other miscellaneous delays and claims violations. This all could result in up to $7 million in fines.

Unfortunately for Anthem, these deplorable cost cutting measures haven't really helped the bottom line. In order to continue to reap sufficient revenues to pay commissions, large executive compensation packages, shareholder dividends, public relations clean-up efforts, and lobbyists, it is necessary to dig into the people who have purchased plans in the individual market.

Is this just a case of a bad actor engaging in depraved business practices or a symptom of a larger problem?

As noted above, California isn't the only state seeing rate hikes in the individual market. Michigan, Rhode Island, Maine, Indiana, Oregon, and other states are seeing, or have seen, requested rate hikes ranging from 15-56% on top of increases that occurred last year. So this begs the question: Is an affordable individual health insurance market even viable?

Here we are looking at a company - Anthem Blue Cross -- with a clear record of callous business practices and they can't even make it with California's generous 70% medical/loss ratio without substantial rate increases.

I think it is time to take a serious look at substantive health reform. President Obama's Bipartisan Summit was interesting and I am hopeful that substantive change will result. But, if the federal government doesn't take care of it, reform may be needed on a state by state basis. I have repeatedly supported and advocated for single payer healthcare. A bill to create such a system, Senate Bill 810, authored by Senator Mark Leno, is currently awaiting a hearing in the State Assembly and I plan on supporting it. Californians and Americans alike are struggling, and healthcare is one problem to which we can not afford to turn a blind eye.