85.7 F
San Fernando
Thursday, Mar 28, 2024

Blue Cross of California Under Microscope by State Over Rate Hikes

When Anthem Inc. purchased Thousand-Oaks-based WellPoint Health Networks last year, the executive compensation packages that Anthem paid to WellPoint employees made headlines, prompting Insurance Commissioner John Garamendi to force the companies into financing public health programs before he approved the merger. Garamendi promised his department would keep watch to make sure that consumers did not end up paying for millions in merger costs through their premiums, and has since launched an investigation into rate hikes at WellPoint’s subsidiary, Blue Cross of California, based in Woodland Hills. The Department of Managed Health Care, upon receiving complaints from some Blue Cross policy holders, launched its own investigation in late April. Blue Cross of California appeared before the DMHC on Friday, May 13, to explain its premium increase; the DMHC called the hearing after questioning whether the increase was related to the purchase of Blue Cross’ former parent, WellPoint Health Networks, by Anthem Inc. Lynne Randolph, spokeswoman for the DMHC, said the department has received about 75 complaints from Blue Cross members about increases in its individual and family plan premiums. Randolph said the department has been especially attentive to WellPoint’s activities in order to make sure that the company is fulfilling the promises it made to the state in order to receive approval for its merger. The Department of Insurance, among other restrictions, required that none of the company’s premium revenue would be “used to finance the merger. This is not so much a premiums issue, it’s what the premiums were used for that needs to be explained,” said Randolph. Randolph added that a number of the complainants, many of whom were Southern California residents, were upset that they had not received any notice of the rate increases. She added, however, that people may have misplaced their notices. Pre-merger Michael Chee, spokesman for Blue Cross, said that the 13 percent statewide average rate increase for individual and family policies was not unusual for health plans and that it was calculated before the merger took place. He said that two local insurance brokers attended the meeting in Sacramento to state that neither had received any complaints from more than 2,000 customers about rate increases. “There were about 850,000 policy holders notified of rate increases, and about seven percent of those had no increase,” said Chee. “If you take the seven percent back out and divide (the remainder) into seventy-five complaints, it’s less that a fraction of a percent.” In a statement released prior to the public meeting, Blue Cross said that the “rate increases are driven by the rise in cost of medical services and the consumption of those services by our members. These factors include increased prices charged by doctors and hospitals with whom Blue Cross contracts, increases in the cost of medical services, increases in the use and cost of new technologies and pharmaceuticals and an overall increase in the utilization of all these medical services.” Insurance Commissioner John Garamendi extracted several promises from Anthem last year before approving the merger, including that none of the merger costs will be paid for with premium dollars. He also required that the newly merged company, named WellPoint, invest in several public health programs and continue to participate in government health care programs like Medi-Cal and Healthy Families. Garamendi, whose department is conducting its inquiry into Blue Cross’ rate increases, released a statement supporting the DMHC’s inquiry on April 27. “I approved the merger last year of Anthem and WellPoint on the condition that none of the costs of the deal would be paid by California policyholders. I intend to hold executives to their promise,” Garamendi said. “I will continue to test the validity of the Blue Cross filings, and if we find that any increase was connected to the merger, it will be rolled back.” Across-the-board Garamendi said that health care premiums have risen at every insurance company by about 50 percent in the last four years, and that he was working to slow annual double digit increases when he approved the merger of Anthem and WellPoint. Previous government efforts to regulate health insurance premium inflation have ultimately failed and some analysts say that those efforts do not address the real root of the state’s health care problems. In 2003, Senate Bill 26 would have given the Department of Insurance the power to improve premium increases. Such a measure, said California Health Care Foundation spokeswoman Marian Mulkey that in order to balance losses, insurers would only reduce care for its policy holders. “While health care premiums are rising in California, HMO profits have remained flat. Profitability is only one component of costs. Other components include new technology, more use of expensive services, more prescription drugs, expansion of insurance coverage and mandated benefits, and demographic changes,” Mulkey said in a news release last year. Randolph said the DMHC has requested more information from Blue Cross about how it determined its rate increases, to make sure that the company only increased premiums to cover medical costs. She said the DMHC’s investigation would hopefully be concluded close to the end of the month.

Featured Articles

Related Articles