Indianapolis-based WellPoint Inc. said Wednesday that its California subsidiary will dial down rate hikes that drew national outrage earlier this year and helped spark a final push for health care reform.
The health insurer said the subsidiary, Anthem Blue Cross, now plans to raise premiums by 14 percent on average for people insured individually and it will cap the hikes at 20 percent.
In April, the company withdrew increases that stretched as high as 39 percent and averaged 25 percent after it received strong rebukes from consumers, President Barack Obama and members of his administration—including Health and Human Services Secretary Kathleen Sebelius, who said she found it hard to understand how Anthem Blue Cross could ask for such steep hikes after its parent reported a $4.75 billion profit in 2009.
WellPoint has said its rates have been driven up by rising medical costs and healthy people dropping coverage during the recession, among other factors.
WellPoint's original proposed rate hike in California is widely seen as having reignited Obama's push for a health care reform measure that covers millions of uninsured people. That bill passed Congress in March after months of debate.
WellPoint is the largest U.S. commercial health insurer based on membership. Its California individual insurance business covers about 800,000 people.
Executives said the new rates are lower for several reasons, including the use of more recent claims data and a hope that regulatory review would go faster. Further delay would "just compound the issue into next year," said Brian Sassi, president and CEO of WellPoint's Consumer Business unit.
The insurer said it expects to lose more than $100 million this year on its California individual insurance business.
"Our losses are really primarily driven by the lost revenue just from the six-month delay we already have," Sassi said.
The 14-percent average increase is a few percentage points below the expected increase in medical costs, according to Brad Fluegel, WellPoint's chief strategy officer.
"Those costs are continuing to go up quite dramatically," he said.
State regulators have 30 days to review the rates, and then the insurer must give customers 30 days' notice on the hikes. WellPoint hopes to have the new rates go into effect by Sept. 1, which is six months after the original increases were to hit.
WellPoint backed off its original proposed hikes after an independent audit determined they were based on flawed data. California Insurance Commissioner Steve Poizner said in April the audit found mathematical errors and, in some cases, double counting of data.
Another insurer, Aetna Inc., withdrew proposed California rate hikes of 19 percent on average earlier this month, after an independent review found errors in its calculations.
WellPoint officials said Wednesday its own math errors had a "minimal impact" on the size of the old increase.
Anthem Blue Cross has become a poster child for stricter premium regulation, said Jamie Court, president of Consumer Watchdog, a group based in Santa Monica, Calif.
Court said the double-digit increase following its earlier hike so closely shows the need for a law that gives regulators "the power to say no" to rate increases from insurers making "too much" money.
A survey by the nonprofit Kaiser Family Foundation found that recent individual insurance premium hikes requested by insurers have averaged 20 percent.