Facebook Slider
Get News Alerts!
Wednesday, 24 February 2010 07:59

Anthem Blue Cross Fails to Defend Rate Increases Before House Subcommittee: 'The Insurance Model is Fundamentally Broken'

  • font size decrease font size decrease font size increase font size increase font size
  • Print
  • Email

BUZZFLASH NEWS ANALYSIS
by Meg White

As you may have seen in my piece from earlier today, I was impressed by the eloquence of the Anthem Blue Cross policy holders who testified before the House Subcommittee on Oversight and Investigations today.braly CEO wellpt.

I was significantly less impressed with the arguments offered by the second panel of witnesses. Angela Braly, CEO of Anthem's parent company WellPoint, Inc. and Cynthia Miller, WellPoint's chief actuary, spent most of their time trying to justify the 39 percent increase in premiums they'd requested by falling back on some pretty tired defenses.

They said that young, healthy people were dropping their insurance due to the recession. They blamed the increase in costs on doctors and hospitals charging more for services. They defended multi-million dollar retreats in Hawaii as ways to connect with their corporate customers.

"The elephant in the room is rising healthcare costs," said Braly. "We're the tail on the elephant."

There was a lot of self martyrdom, as Braly complained that insurance companies are getting all the blame for the healthcare crisis. Even the ranking Republican had trouble feeling sorry for the Anthem representatives, though.

"You had to know this was going to be trouble. I mean, a 39 percent increase in this climate?" questioned Rep. Michael Burgess (R-TX). "You knew you were going to get bad publicity."

The recession played a part in other lawmakers' questioning as well. The insurance company raised their rates precipitously, while at the same time increasing their profits over their 2008 numbers from 4.6 to 4.8 percent. Braly confirmed that her for-profit company made nearly $2.4 billion in profits in 2009, and said she expected similar numbers in the near future.

"When your policy holders are taking a hit... it seems like every year you've got to have a profit," Subcommittee Chair Bart Stupak (D-MI) said. "It'd be great if we could guarantee every business have a 2.5 to 5 percent profit every year."

Anthem also felt the need to opine on the White House healthcare summit planned for tomorrow. Braly took up the cause of both Democrats and Republicans in her advocacy for both medical malpractice reform and coverage mandates.

"California has a medical malpractice law," Rep. Henry Waxman (D-CA) pointed out. "It hasn't been sufficient to hold down costs to keep you from raising premiums."

Rep. Jan Schakowsky (D-IL) tried to refocus the hearing, noting that it was convened "not for you to come and lecture us as to what we need to put in our bill." She also noted that WellPoint had previously sent out correspondence urging employees to oppose healthcare reform on the misguided basis that it would result in tens of millions of Americans losing coverage.

"This 39 percent increase flies in the face of that letter," Schakowsky said.

Schakowsky's questioning was scathing throughout, but she was perhaps at her best when she asked Braly how much she earns each year. Having been told about the CEO's $1.1 million salary, with an $8.5 million stock compensation, Schakowsky said, "Of course. It makes sense now that you would need a big rate increase, now that you've told us that."

Rep. Lois Capps (D-CA) took issue with the notion that healthy young people are simply dropping coverage because they don't want it, saying that rate increases such as the one in question likely have more to do with the drop-off than external issues.

"We lose everything to pay our medical bills, even though we have insurance," Capps said, in paraphrasing the testimony of the Anthem customers in the first panel. "It's certainly not an attractive enticement for me... You don't market yourselves very well."

Braly insisted that Anthem was doing everything it could to keep premiums low. "We are on their side," she said of her struggling customers.

"They don't feel like it," Capps snapped.

Perhaps the most troubling moment was when Rep. Peter Welch (D-VT) questioned the WellPoint representatives about an internal memo circulated prior to their imposing a voluntary cap on premium increases. In looking at how much they'd increase premiums if there were no overall cap, WellPoint itself estimated that some 27,000 customers may see increases of 228 percent in their premiums.

"So there's a business model that's working for you, for you as an insurer, but its coming at great expense to others," Welch said. "That's where we're headed. That's the problem... that the insurance model is fundamentally broken."

BUZZFLASH NEWS ANALYSIS