Premium Increases Did Not Pay for WellPoint Acquisition, Audit Finds

Increased Blue Cross of California health insurance premiums cannot be attributed to the acquisition in 2004 of WellPoint by Anthem, according to an independent auditor's report issued Wednesday by the Department of Managed Health Care, the Los Angeles Times reports. Blue Cross is a subsidiary of WellPoint.

The report found that premium increases, which averaged 8% for small group plans and 13% for individual plans, were not "out of line with medical cost inflation." The report stated that the proportion of premium increases to cover agent or broker commissions remained consistent and that the proportion used to cover administrative costs and profits decreased slightly.

Premium rate increases in 2005 were similar to increases imposed on Blue Cross members during the three years before the merger, according to the report.

Consumer activist Jamie Court criticized the methodology used for the report because the auditor did not "challenge the assumptions behind money not spent on medical care."

However, Kevin Donohue, deputy director of DMHC, said state law does not allow the agency to challenge or examine actuarial assumptions from WellPoint. He added that the goal of the audit was to make sure WellPoint "didn't change their methodology, or business plan, after the merger" (Vrana, Los Angeles Times, 11/24).