POLITICS
04/10/2010 05:12 am ET Updated May 25, 2011

Obama Admin Demands Answers From Anthem Blue Cross After Private Insurer Raises Rates 39%

Health and Human Services Secretary Kathleen Sebelius is asking the largest for-profit health insurer in California to "provide a detailed justification" for expected rate increases that could hike its consumers' premiums as much as 39 percent.

In a letter to Leslie Margolin, president of Anthem Blue Cross, Sebelius struck a harsh tone about the expected rate hike, which was reported this past weekend by the California press. Calling the expected 39-percent rate increases "extraordinary" and noting that they were "up to 15 times faster than inflation," the HHS Secretary asked for a detailed synopsis of how much of that money would go to medical care versus administrative costs.

"Your company's strong financial position makes these rate increases even more difficult to understand. As you know, your parent company, WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone," Sebelius wrote.

"I believe Anthem Blue Cross has a responsibility to provide a detailed justification for these rate increases to the public," she added. "Policy holders in the individual market deserve to know if their premium increases would be invested in better medical care or insurance company overhead costs like salaries, profits, and advertising."

An official with HHS said that, as of early Monday afternoon, no response has yet been received. Sebelius did mention the reported rate hike during a speech before the Health Affair's National Health Policy Conference on Monday.

On Friday, the Los Angeles Times reported that many of Anthem's "approximately 800,000 customers who buy individual coverage" could see the price of their plans go up starting on March 1 -- some by as much as 39 percent. People with group coverage aren't affected.

This isn't the first case of a health insurer jacking up rates to meet profit expectations. Back in December, the Huffington Post reported that Aetna was planning to force up to 650,000 clients to drop their coverage next year as it raised premiums starting in 2010.

Here is Sebelius's letter in full:

February 8, 2010

Leslie Margolin
President, Anthem Blue Cross
Delivered Via Fax

Dear Ms. Margolin,

One of the biggest pressures facing families, businesses and governments at every level are skyrocketing health insurance costs. With so many families already affected by rising costs, I was very disturbed to learn through media accounts that Anthem Blue Cross plans to raise premiums for its California customers by as much as 39 percent. These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians, many of whom are already struggling to make ends meet in a difficult economy.

Your company's strong financial position makes these rate increases even more difficult to understand. As you know, your parent company, WellPoint Incorporated, has seen its profits soar, earning $2.7 billion in the last quarter of 2009 alone.

I believe Anthem Blue Cross has a responsibility to provide a detailed justification for these rate increases to the public. Additionally, you should make public information on the percent of your individual market premiums that is used for medical care versus the percent that is used for administrative costs. Policy holders in the individual market deserve to know if their premium increases would be invested in better medical care or insurance company overhead costs like salaries, profits, and advertising. I am aware that the State of California is investigating this matter, and urge Anthem Blue Cross to cooperate fully. In the meantime, I will be closely monitoring the situation.

At a time when health care costs are a critical threat to families as well as the nation's economy, I hope you appreciate the urgent nature of this request. I look forward to your prompt reply.

Sincerely,

Kathleen Sebelius
Secretary of Health and Human Services