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Read Making a Killing

home / healthcare / in the media

San Jose Mercury News
Apr 19, 2005

by Barbara Feder Ostrov

Hikes by Blue Cross spur investigation

Are They Tied to Merger With Anthem Last Year?
Some Blue Cross of California patients are wondering whether hefty hikes in their health insurance premiums this year could be paying for last year's expensive merger between Blue Cross' parent company and Anthem, an Indianapolis insurer.

State Insurance Commissioner John Garamendi said Monday that he is investigating complaints filed with his office, and a consumer watchdog group said it had received several dozen reports of higher-than-usual rate increases, including some as high as 50 percent.

The $16.5 billion merger of Blue Cross parent Wellpoint and Anthem created the largest insurance company in the country, but it was controversial because it carried an estimated $4 billion in merger costs, including $200 million to $600 million in executive bonuses.

Many feared that policyholders would bear the brunt of those costs, and Garamendi withheld approval of the merger until he extracted an estimated $100 million in concessions for California, including money for health care in poor communities. Blue Cross also promised that premiums paid by California policyholders would not be used to pay for the merger.

A spokesman for Blue Cross said Monday that only patients with individual policies, whether HMO or PPO insurance, received premium increases. About half of the company's 850,000 individual policyholders received increases of no more than 15 percent, Michael Chee said. Chee could not say how many policyholders received higher increases but said they were capped at 23 percent.

Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights, a watchdog group, said those increases are higher than the industry average of 9 percent to 10 percent. The group has received calls from Blue Cross of California policyholders citing premium increases of 20 percent to 50 percent, and Monday, it sent letters to Garamendi and Gov. Arnold Schwarzenegger calling for an investigation.

Garamendi has been looking into the issue for a month, he said, since receiving a handful of complaints. His office, which has jurisdiction over about 10 percent of Blue Cross patients, will conduct audits of the premium increases to see if they violate the deal he struck with Blue Cross of California, he said.

"I'm not here to believe what insurance companies tell me,'' he said. "I'm here to test the accuracy of their statements."

If the premium increases are determined to be linked to the merger, consumers will not have to pay them, he said.

The Department of Managed Health Care, which oversees the remaining Blue Cross of California patients, had not been aware of the premium increases but had received some complaints from consumers and will look into the issue, said spokeswoman Lynne Randolph.

The Department of Insurance consumer help line is (800) 927-4357. The Department of Managed Health Care consumer help line is (888) HMO-2219.

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