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May 14, 2005
by State & Local Wires
California regulators step up investigation of Blue Cross hikesSACRAMENTO, CA -- California regulators are stepping up an investigation to determine if Blue Cross improperly hiked its insurance rates to cover an estimated $4 billion in costs related to its acquisition last year by another firm.
At a state hearing Friday, California Department of Managed Health Care director Cindy Ehnes said she had received more than 70 consumer complaints about the increases since they were instituted in March.
Prodded by consumer advocates, Ehnes said her department, which was already reviewing compliance by Blue Cross with agreements related to the merger, would step up its investigation.
"This administration is committed to ensuring available and affordable coverage," Ehnes told those at the hearing.
Consumer advocates raised concerns last year about the November merger between Thousand Oaks-based WellPoint Health Networks, the parent company of Blue Cross, and Anthem Inc. of Indianapolis. They have since pushed for the inquiries about the $21 million deal.
California Insurance Commissioner John Garamendi, who tried to block the merger, is also looking into the recent rate hikes.
Top Blue Cross executives insisted the increases levied since March 1 were fair and unrelated to the merger. They also said they were cooperating with the state inquiries.
Before the merger, WellPoint pledged to regulators that the 7.6 million Blue Cross policyholders in California would not foot the bill for costs associated with the acquisition.
But consumer activists testified Friday that some Blue Cross customers were seeing rates jump 20 percent to 40 percent on individual and family plans.
"Our worst concerns have come home to roost," testified Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights. He said the company should have to justify the hikes.
"The only people being squeezed here in the Anthem-WellPoint deal are those of us Californians who are families and who are individual business owners, just trying to make a decent living," testified Tracy Campbell of El Dorado Hills, who owns a small public relations firm.
Campbell said the rate for her family of four jumped 20 percent to $525 a month for a high-deductible policy covering only catastrophic illnesses.
Bryan Corley, who calculates premiums for the insurer, blamed the higher rates on the rise of physician and hospital costs, an increase in the number of people filing insurance claims and administrative expenses.
He said the rate hikes were calculated before the merger was finalized and averaged around 13 percent with a cap at 23 percent.
Corley also testified that the company's total costs rose more than 15 percent last year and were expected to go up nearly the same amount in 2005.
Deborah Lachman, a senior vice president for Blue Cross, said the larger increases were likely due to other factors such as crossing an age benchmark or having children.
Blue Cross officials said their premiums remain competitive with other health insurers.
Ehnes said after the hearing that the investigation will likely take several more months.
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