Health insurer Anthem Blue Cross will postpone its much-criticized plan to raise rates for some California residents who buy insurance on their own, after reaching a deal Saturday with state regulators.
Anthem’s planned rate increase, which the state estimates would affect about 700,000 customers, averaged 25 percent and would have been as high as 39 percent for some.
Anthem Blue Cross of California, based in Thousand Oaks, agreed to postpone the increase from March 1 until May 1 so California could have outside experts review the company’s complex and detailed plan filing, including data on the medical costs it expects to incur.
The California Department of Insurance had been working with Anthem since mid-November to get more information about the increase, said Insurance Commissioner Steve Poizner. He wanted experts to confirm that new rates comply with a 2006 state law that insurers spend 70 cents of every premium dollar on care.
“Medical-cost inflation in California is in the 10 to 15 percent range, so I have a healthy skepticism how they can get to 39 percent” and comply with the law, Poizner said.
If they don’t, he said, he will direct the company to reduce its prices, “or I will take away their license to sell insurance” in California.
He officially requested the delay Monday but said Anthem stuck to its position that the individual insurance plan had lost money last year and the rate increases were justified — until Saturday.
The change of heart came after a week of extensive media reports about the rate increases, harsh criticism from the Obama administration and two congressmen scheduling a hearing for Feb. 24.
“They did the right thing today,” Poizner said during a conference call. “These are huge, massive rate increases, very concerning to me and my team.”
Anthem, a subsidiary of insurance giant WellPoint Inc. of Indianapolis, said its proposed rates reflect anticipated medical costs. The company has blamed the increased rates on the recession, rising medical costs and more healthy people dropping out of the plan, leaving fewer premium dollars to cover costs.
But Health and Human Services Secretary Kathleen Sebelius said Thursday “it remains difficult to understand” how increases of that size can be justified when WellPoint Inc. reported a $4.75 billion profit in the last quarter of 2009.
