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WellPoint's health insurance rate hike spurs legislative inquiry

February 20, 2010

The furor over WellPoint Inc.’s premium hikes migrated from California to Indiana in recent days, with state lawmakers holding a high-profile hearing and a union group staging a protest outside the company’s headquarters.

Executives from the Indianapolis-based health insurer, as well as regulators at the Indiana Department of Insurance, received a grilling Feb. 17 before the Committee on Insurance of the Indiana House of Representatives.

The hearing was called by Committee Chair Rep. Craig Fry, D-Mishawaka, because WellPoint customers buying health coverage on their own will face an average price hike of 21 percent come March 1. Some will see rates spike as much as 34 percent, or, if they have entered a higher age bracket, even higher.
 

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With TV news cameras rolling, Fry and other lawmakers fired numerous questions at Rob Hillman, president of WellPoint’s Indiana subsidiary, Anthem Blue Cross and Blue Shield. The tiny committee room in the basement of the Indiana Statehouse was filled to standing-room capacity during the nearly two-hour hearing.

Fry forced Hillman to justify those increases in light of WellPoint’s 2010 profits that topped $2.9 billion, not including the sale of a pharmacy business, as well as multimillion-dollar lobbying expenses and what Fry called “enormous salaries” for executives.

“I don’t know how you defend that kind of increase,” Fry said. “I understand you guys are in business to make money. … But people can’t afford your product.”

Hillman downplayed the health insurance industry’s profits and executive pay, saying they represent little more than 2 percent of premiums. But he defended the premium increases, blaming medical innovations for constantly driving up costs.

On top of that, Hillman said, growing numbers of healthy people are dropping health insurance, leaving fewer dollars to cover the medical bills of unhealthy people. That has forced WellPoint to raise rates even faster.

“The affordability of health care is the biggest risk for our business,” he said, adding, “We are on a very bad path right now.”

Before sparring with Hillman, Fry zeroed in on Doug Webber, Indiana’s acting insurance commissioner—particularly when Webber said the Indiana insurance department does not inquire what percentage of premiums WellPoint’s Anthem subsidiary takes as profit.

“Profits aren’t brought into consideration? How do you set rates if you don’t take everything into consideration?” Fry asked.

Webber said the insurance department verifies that Anthem spends at least 55 percent of premiums on medical care for its individual policyholders. But the department does not require an accounting of the other 45 percent.

Webber emphasized that the Indiana insurance department hires an independent actuary to review each premium increase requested by Anthem—something the state of California is only now doing.

But Fry objected that the review is done by only one person—and any pushback against Anthem happens behind closed doors. He said he wants “a process that’s more open, not done in the backroom.”

Fry said he would insert language that would require an open rate-review hearing into Senate Bill 357, which makes various changes to insurance regulations.

The next day, Rep. Andre Carson, D-Indiana, was set to speak at a protest rally outside WellPoint headquarters on Monument Circle.

The organization behind the protest, a janitors union group called Central Indiana Jobs with Justice, wants WellPoint to delay implementing premium increases on individual policies—as it has done in California while state regulators investigate.

“At these rates, people will have to choose between making their monthly household payments and keeping their health coverage,” Allison Luthe, an organizer for Jobs with Justice, said in a statement.

WellPoint’s hefty rate hikes were first reported in California, but became national news Feb. 7 when President Obama chastised the company’s plans in a television interview. The average hike in California will be 25 percent. •

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