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WellPoint CEO blames health costs for hikes

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A major health insurer that wants to boost rates in California by up to 39 percent was trying to maximize profits by purging its sickest customers while spending millions on exorbitant salaries and retreats for its executives, congressional Democrats said Wednesday.

Rep. Henry Waxman, chairman of the House Energy and Commerce Committee, said at a hearing on WellPoint Inc. that his panel's investigators had received internal company documents showing that in 2008, 39 company executives received salaries of $1 million or more. And in 2007 and 2008, it spent $27 million for 103 executive retreats.

"Corporate executives at WellPoint are thriving, but its policyholders are paying the price," said Waxman, D-Calif.

WellPoint owns Anthem Blue Cross, which wants to raise rates on individual policy holders in California and blames those increases on rising medical costs.

In prepared testimony for the panel, Angela Braly, CEO of WellPoint Inc., blamed the increases on the growing price tags for hospital care and pharmaceuticals. She also cited the ailing economy, which has caused many younger, healthier people to save money by dropping coverage, leaving her company covering an older, sicker population.

"Raising our premiums was not something we wanted to do," Braly said. "But we believe this was the most prudent choice."

Braly's total compensation from WellPoint was nearly $10 million in 2008, according to IBJ research. Compensation information for 2009 is not yet available.

Anthem's rate boosts in California have made it a poster child for Democrats arguing that the nation's health system must be overhauled. Wednesday's hearing comes a day before President Barack Obama hosts bipartisan congressional leaders for a daylong, televised discussion of health care, a session he hopes will provide new momentum to Democrats' stalled legislation.

"This is a national problem," said Rep. Bart Stupak, D-Mich., who chairs the oversight subcommittee holding the hearing.

Republicans on the committee said little to defend Anthem, but noted the hearing's timing just before what Rep. Michael Burgess, R-Texas, called Obama's "six-hour photo op."

It also was occurring the same day the House planned to vote on legislation repealing the health insurance industry's exemption from federal antitrust laws. Obama and Democrats say the measure would help spur competition, but analysts say it would have little impact on how insurers do business because they already are regulated by states.

Democrats also invited some California residents to describe their experiences with Anthem.

In prepared testimony, Jeremy Arnold of Los Angeles said Anthem informed him last month that his rates would grow by 38 percent to $319 a month, which could force him to take a less expensive policy with higher deductibles and hope he doesn't get sick.

"Hope is not an adequate health care policy," Arnold said.

Braly expressed some sympathy.

"Clearly, we understand that rate increases create a challenge for many of our members," Braly said. "However, it is important to know that many of our members often have a choice of coverage."

She said the company was dismayed when the health overhaul debate in Washington turned into "an attack on the health insurance industry," which she said was "very misleading."

After its rate announcement generated criticism, Anthem said it was postponing the increase from March 1 until May 1 while it is reviewed by California regulators.

Anthem covers more than 8 million Californians, including about 800,000 who buy their policies directly. It is on those individually covered people that Anthem has proposed rate increases of up to 39 percent, though the company says the average increase is 25 percent — which the company says is in line with competitors.

Braly said the company lost $10 million on individually insured Californians last year.

In a report earlier this month, the Obama administration cited WellPoint's reported profit of $2.7 billion in the fourth quarter of last year as evidence that insurers' rate boosts need to be curbed.

But Braly cited a one-time sale of an asset and said the profit excluding that was $380 million after taxes. She said even if the company returned that profit entirely to its customers, they would each receive an average $5.13 per month.

Braly said the rate increases and growing costs show why a health overhaul is needed. She said the Democratic bills debated so far have been inadequate because they don't control the growth of medical costs.

"Changing how we finance health care without changing how we deliver health care is simply not sustainable," she said.

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  • Greed
    It is called GREED, GREED, GREED. It is the basis of the American capitalist system. Until people understand that we have a responsibility to take care of each other (which is the definition of "society")and act and judge with compassion, we will never change. Our hypocrisy and GREED will rule. The truth is that people could control their GREED, live better than most, and still show compassion for others. There are some companies that are functioning with profits, living within reasonable limits and respecting the employees and the customers. I could go on for a long time with my thoughts about the problems with GREED, GREED, GREED in our society, but there are already so many books about the subject.
  • why can't you understand?
    A CEO who earned 10 million...39 executives over 1 million...fancy retreats and you want to blame the providers & subscribers? A quarterly profit (even after paying these unbelievable payrolls) of 2+ BILLION dollars and you want to increase rates up to 39%???? WHEN will the GREED stop???? How do we wake these people up???
  • A final note
    Hi Dave!
  • Clearer Math
    An article from 2006 claimed average individual health insurance premiums in California were approximately $211.00.

    So, since we KNOW there haven't been any increases in the last 4 years, lets use $211.00 as the base premium.

    $211+25%(the average claimed increase by Wellpoint)=$263.75 for an average increase of $52.75 per policy holder.

    $52.75(avg. Increase)x800,000(estimated insured)=$42.2 mil.

    So, the Wellpoint increase is roughly 4 times the amount of their claimed loss. Nice!

    Dang, I wish I was in a racket where I could demand my margins.
  • some fuzzy math
    $255.00(initial premium cost)+$64.00(25% increase)= $319.00(new premium cost($318.75 actual))

    $64.00(estimated 25% increase)x800,000(insured)= $51.2 mil

    I guess they covered that 10 mil loss.
  • Doctors and Health Insurance
    O yeah, forgot to add that my dad had to pay $900 out of pocket for the colonoscopy, instead of the insurance company actually covering the entire procedure like they should have. I mean, what are you supposed to do in this situation?
  • wellpoint
    Who is to say that she shouldnt make more or less, if greater competition were allowed the free market would address this. Either their services/prices would be competitive or not. The bigger govt comments here are mind shocking. How and why would we think costs would not skyrocket and service quality plummet with govt running the show.
  • Doctors and Health Insurance
    My father recently went in for a colonoscopy, which is covered under his insurance as a preventative procedure that he is allowed to do once a year. However, when it came time for the doctor to bill the insurance company, the doctor wrote the screening as something that had to be done due to pre-existing health concerns. Which was a TOTAL LIE!! But there was no way to fight it. Wanna get into a law suit with an insurance company? Me neither.
  • CEO Salary vs WLP losses
    "Braly said the company lost $10 million on individually insured Californians last year." Hmmmm, if Angela didn't make $10 million a year, WLP could have broken even...really, why do you think you deserve $10 million in salary. No one is worth that much!
  • Anthems problem is our problem
    Anthem says healthy people wont buy the insurance so they are stuck with higher cost insureds and lose money.

    Then when those people have an issue, the provider is stuck with not getting paid (and therefore 'cost shifts' to those with insurance) or the people go bankrupt (shifting financial burden to others creditors) or maybe go on Medicaid (becoming a burden on state budget and Taxpayers)

    So Anthem raises premium (which makes sense to me) and people drop out. They are now a potential problem for the system. That's why we need a govt solution. Not to run healthcare or employ doctors, but to be the system to spread risk (insurance) among everyone.
  • Insurance Agent's perspective
    As an insurance agent selling for Anthem and as a Republican, I want to scream at the complexity of this issue. There are no easy answers, we are already subsidizing millions of people.In my small town the HOSPITALS are the major contributors to fundraisers so they have profits just as the insurance companies do. Every faucet of health care is broken and every one selling a product or buying service is to blame. Most of us want to get to 65 to go on medicare where health coverage is guaranteed to a degree, so why can't we accept that a single pay system may work? My sister lives in Canada and she LOVES her health care. IF she chooses not to wait, then they pay out of pocket. That's better than now, I can't afford to go to the doc at all because I have a $5000 deductible. The system is broken and all sides need to find a workable solution, including promoting a healthier lifestyle that food manufacturers are against!
  • Health cost???
    I thought it was healthy people dropping there insurance that was the culprit?????
    and of course..even healthy people can't afford these high,increasing premiums.....

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