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Checking for Any Further "Miscalculations" in Insurance Rate Hikes

Upon learning that Anthem Blue Cross' infamous requested rate hike in California was based on erroneous calculations, HHS Secretary Sebelius writes to Governors urging them to check whether similar miscalculations have been made elsewhere.

Several months ago, Anthem Blue Cross, an insurance company in California owned by WellPoint, informed its customers that they would see their health insurance premiums rise by as much as 39 percent. President Obama, his team, leaders in Congress and officials in California spoke out and an investigation found that there were significant errors in Anthem Blue Cross’s justification for the massive rate increase. Last week, the company withdrew the proposed increase and admitted they made “miscalculations.”

The announcement was good news for the more than 800,000 Anthem Blue Cross customers in California who will receive some temporary relief, but it raised troubling questions about the company’s actions. Did WellPoint make similar miscalculations in the other states where it does business? Will those errors leave consumers stuck with higher premiums?

Last night, HHS Secretary Kathleen Sebelius wrote to Governors across the country and urged them to examine this issue. In her letter, she wrote:

I am writing to call your attention to the recent withdrawal by Anthem Blue Cross, an affiliate of WellPoint, Inc., of the proposed rate increase of up to 39 percent for many of its California individual market policyholders.  The California Department of Insurance found that the proposed rate increase was based on unreasonably high assumptions about the rate at which medical costs are increasing.

In light of this recent finding, I urge that, to the extent you have authority to do so, you re-examine any WellPoint rate increases in your state to determine whether any mistaken assumptions similar to those made in California were made in your state.  Even small errors can mean unaffordable premiums for policyholders.

Sebelius also urged the Governors to examine whether or not they have the tools and authority they need to approve all rate increases before they take effect.

The ability to require insurers to modify an increase if a proposed rate increase is unjustified has been shown to be effective in many states.  The Affordable Care Act expressly contemplates support for state efforts in rate review, appropriating a total of $250 million to states to assist in meaningful rate review.

The Affordable Care Act is already ending some of the worst insurance company practices and we’ll keep working to bring costs down and give the American people, not big insurance companies, control of their health care.

Stephanie Cutter is Assistant to the President for Special Projects