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Apr 27, 2005
CONTACT: Jerry Flanagan, (310) 392-0522 ext. 319
CA Regulators Announce Hearing on Blue Cross Rate Increases
Company Earnings Double in Wake of Recent MergerThe Department of Managed Health Care (DMHC), which oversees Blue Cross of California, called for a hearing today to investigate huge rate increases following an announcement this morning that the health insurer's corporate income has more than doubled in the last year. Under public scrutiny, Blue Cross' parent company, WellPoint, agreed last November that premiums would not increase as a result of its recent merger with Anthem Inc. On April 18th the Foundation for Taxpayer and Consumer Rights (FTCR) called on state regulators to investigate premium increases ranging as high as 30% and more.
This morning, WellPoint announced that its 1st quarter net income has increased more than 100% over last year. WellPoint's 1st quarter net income was reported as $611 million compared to $295 million last year.
"The burden of proof is on Blue Cross to prove that these double digit rate increases are not the result of the recent merger," said Jerry Flanagan of FTCR. "Regulators must use their full authority to investigate the rate increases and require Blue Cross to refund overcharges."
In a letter sent on April 18 to Insurance Commissioner Garamendi and Governor Schwarzenegger, who oversees the DMHC, FTCR cited legally binding commitments made to regulators, prior to giving clearance to the merger, that an estimated $265 million in executive bonuses and $4 billion in financing charges would not be passed on to patients and business owners. The merger created America's largest health insurance company. FTCR noted that two WellPoint executives also received salary increases this year of 15-20%.
Commissioner Garamendi, responsible for overseeing Blue Cross Life & Health, announced that the Department of Insurance has already begun investigations into the dramatic rate increases.
According to the DMHC's press release:
"The meeting will examine if Blue Cross violated its promise to the DMHC that premiums would not be increased to finance its change in control from parent company, WellPoint, to Anthem Inc."
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The Foundation for Taxpayer and Consumer Rights (FTCR) is California's leading nonpartisan consumer advocacy organization.
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