Department of Managed Health Care Hearing Addresses Blue Cross Premium Increases
The Department of Managed Health Care on Friday held a hearing to address concerns about whether Blue Cross of California raised premiums to finance the merger of Blue Cross parent organization WellPoint Health Networks with Anthem, the Los Angeles Times reports (Lifsher, Los Angeles Times, 5/14). The merger created the largest U.S. health insurer, with about 28 million members, including about seven million California residents (Rapaport, Sacramento Bee, 5/14).
According to the Times, DMHC "picked up the pace" of its investigation after receiving 70 consumer complaints about premium increases. Blue Cross of California members and representatives from consumer advocacy groups testified at the hearing that some members' premiums have increased by 20% to 40% since the merger (Los Angeles Times, 5/14).
Blue Cross officials testified that the increases are not related to the merger, adding that Blue Cross premiums are competitive with other insurers (Sacramento Bee, 5/14).
Increasing premiums to pay for the cost of the merger would violate the conditions of the state's approval of the agreement, which initially met opposition from Insurance Commissioner John Garamendi (D) and DMHC. State officials approved the merger in November 2004 after Blue Cross offered a $265 million financial deal to the state (California Healthline, 4/19). DMHC in April announced it would hold the hearing to address consumer concerns about the premium increases (California Healthline, 4/28).
DMHC Director Cindy Ehnes said, "In holding this public hearing, we want to protect California enrollees from merger-related premium increases" (Sacramento Bee, 5/14).
Garamendi said the Department of Insurance is conducting a similar investigation into the premium increases.
Bryan Corley, a Blue Cross actuary, said, "The rate increases are in no way related to the cost of the merger." Corley said the increases were related to higher treatment costs, insurance broker commissions and other administrative costs. The insurer's total costs increased by 15.6% in 2004 and are estimated to increase by another 14.8% in 2005, Corley said (Los Angeles Times, 5/14).
Deborah Lachman, Blue Cross senior vice president for individual and small group coverage, said members who had multiple premium increases in a single year likely had experienced automatic premium increases from changes in their lives, such as marriages, births or birthdays (Sacramento Bee, 5/14). According to Lachman, some beneficiaries had seen increases of as much as 50% because of such changes.
Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights said, "These rate increases are much greater than seen in the past and have to be explained" (Los Angeles Times, 5/14).