Wellpoint Defends Rate Hike Request

Citing what it termed "adverse selection," Anthem Blue Cross of California, a subsidiary of Wellpoint, announced that some Golden State residents would get hit with a premium increase as high as 39%.

The administration’s push for health care reform, which seems to be languishing in the ICU, may have gotten a shot in the arm after Anthem Blue Cross of California, a subsidiary of Wellpoint, the nation’s largest health insurer, announced that some Golden State residents would get hit with a premium increase as high as 39%. When administration officials asked for reasons behind the rate increase, Wellpoint’s response cited “adverse selection” as a primary driver behind the rate increases.

Wellpoint noted that the people affected by the rate increase were in the individual market, where the company had suffered losses in 2009. Although rising healthcare costs play a part in the need for a rate increase for this segment of the market, a major reason is that healthier people are dropping their coverage to save money during these tough economic times, while others are keeping their insurance, but buying cheaper policies.

Those who are holding on to benefit-rich plans are those who need them, namely people who are not in good health. When healthy people leave the insurance pool, costs for those who remain are going to go up, according to Wellpoint. The health insurer also noted that the headline number of a 39% increase was a maximum hike. The average increase would run about 25% and some policyholders might even see a decrease in rates.

Following a barrage of criticism from both Obama administration officials and California state regulators, Anthem has agreed to postpone the rate increase until at least May 1, which is two months later than the original implementation date. In the interim, an independent auditor will review the need for the rate hike.