Regulators Investigate Blue Cross Premium Increases After WellPoint-Anthem Merger
California regulators on Monday said that they are investigating whether premium increases for some Blue Cross of California health plans were related to the WellPoint Health Networks-Anthem merger in November 2004, which would represent a violation of the conditions under which California regulators approved the merger, the Los Angeles Times reports (Girion, Los Angeles Times, 4/19).
The $16.4-billion merger, proposed in October 2003, combined the companies under the name WellPoint and established headquarters in Indiana. The deal created the largest U.S. health insurer, serving 28 million people in 10 states and Puerto Rico.
Insurance Commissioner John Garamendi (D), who in July 2004 said he would not approve the deal, last November announced that he would drop his opposition to the merger, after the companies offered a $265 million financial deal to the state. The California deal also included an assurance that the company would increase its expenditures on patient care and not raise premiums for members in California to help pay for the merger.
The Department of Managed Health Care previously had approved the merger with a $100 million commitment. The regulations issued last November provide the same consumer protections to members of Blue Cross Life & Health, which is regulated by the Department of Insurance, and Blue Cross of California, which accounts for 96% of WellPoint's business in the state (Californian Healthline, 11/29/04).
Jerry Flanagan, a consumer advocate with the Foundation for Taxpayer and Consumer Rights, said the group has received calls from Blue Cross members who said their premiums have increased by 20% to 50%. He said such increases are higher than the industry average of 9% to 10% (Feder Ostrov, San Jose Mercury News, 4/19). On Monday, the group sent a letter to Gov. Arnold Schwarzenegger (R) asking the administration to investigate the issue (Rapaport, Sacramento Bee, 4/19).
Garamendi called the premium increases "outrageous." He said, "It was very clear that no part of any premium can be used to pay for merger costs. If we find that any increase was connected to the merger, it will be rolled back" (Los Angeles Times, 4/19). Garamendi said he will conduct an audit of Blue Cross premium increases. "I'm not here to believe what insurance companies tell me. I'm here to test the accuracy of their statements" (Sacramento Bee, 4/19).
Department of Managed Health Care spokesperson Lynne Randolph said DMHC will look into the complaint. She added, "If [premium increases] are significantly above what their medical costs are, then that is something we'd be very concerned about." According to Randolph, DMHC could impose fines if the Blue Cross premium increases are found to be in violation of the merger agreement (Los Angeles Times, 4/19).
Randolph said the administration was "aggressively tracking premiums as they relate to the merger" (Sacramento Bee, 4/19).
Blue Cross spokesperson Michael Chee said the premium increases were "in no way" related to the merger and attributed the increases to changes in medical and prescription drug costs and consumption of health care services (Los Angeles Times, 4/19).
Chee said that about half of Blue Cross' 850,000 individual policy holders received increases of as much as 15% and that premium increases for all members were capped at 23% (San Jose Mercury News, 4/19).