Anthem Blue Cross to Increase Premiums by 39 Percent

Published: Thu 18 Feb 2010

Larry Roth

Anthem Blue Cross of California's recent decision to increase health insurance premiums in California by 39 percent underscores the exigency of sweeping health care reform.

Through its parent company, Well Point, Anthem has tried to justify the prodigious increase by saying that it was losing money on a great deal of the individual medical insurance policies sold in California. Anthem claims that its profit margin is not excessive and is on par with that of other health insurers. So far, the people of California and state and federal lawmakers remain unconvinced.

Consumer advocacy groups are already working with California legislators prepared to author legislation that would fight Anthem's planned premium increases. Recently, however, the health insurance company agreed to postpone the rate hike until California Insurance Commissioner Steve Poizner could review it. Until that review takes place, Anthem has agreed to a temporary rate freeze.

Anthem made a poor decision to display such avarice following a robust profit announcement, but the most important lesson from the Anthem debacle is that the need for health care reform is a pressing one. Even Anthem Blue Cross is citing the premium increase as a case for health care reform, as the company alleges that its insurance pools have dwindled, which compels them to fill them with an additional 39 percent in premiums. Heretofore, Anthem has opposed all versions of the health care reform bill, even those that would make the purchase of its policies mandatory.

The take-home lesson from the Anthem rate hike scandal is that the United States needs to require health insurers to solicit state regulators for permission to increase premiums before they may take effect. California already has a similar model in place for property and casualty insurance, and according to the Consumer Federation of America, those regulations have saved Californians about $62 billion on car insurance. Indeed, California's sweeping health care reform law, Proposition 103, is what created the Insurance Commissioner's office. The Insurance Commissioner is now expanding his authority to review Anthem's proposed rate hike despite the fact that Prop 103 did not regulate medical insurance. Eleven states have insurance commissioners elected by the people, and these elected officials tend to be much harder on insurance companies than their appointed counterparts.

The woes of California policyholders underscore the need for prior approval of health insurance rates in the United States in general. Consumer advocacy groups believe health insurers, like other insurers, should have to request permission for rate hikes and justify their increases. The result will be more affordable and transparent health insurance rates for all Americans if insurance companies have to begin answering to elected officials about their profits and premiums.