WellPoint Takes Heat Over Rates

Posted on Feb 22, 2010 in Uncategorized


WASHINGTON—The Obama administration is seizing on a big health-insurance rate increase by WellPoint Inc. in California as fresh evidence of the need for action as it tries to resuscitate its health-care legislation.

WellPoint, the country’s largest insurer by number of members, responded Thursday to repeated criticism with a letter blaming the 39% increase in the individual market on the economy and rising health costs. Health and Human Services Secretary Kathleen Sebelius hit back with a statement saying she wasn’t satisfied.

All week, Democrats from President Barack Obama on down have cited the company’s rate plans as a justification for a health-care overhaul that would remake the individual market, where people who don’t get insurance through their jobs shop for coverage.

They have made a twofold case: that the Democratic legislation would prevent this sort of price increase, and that insurance companies cannot be trusted and must be controlled with new rules.

Republicans weren’t jumping to defend WellPoint, but they disagreed on the solution.

Republican lawmakers have called for a more step-by-step approach, including high-risk pools for some people with medical conditions who couldn’t otherwise afford insurance.

“If the argument is that the WellPoint hike means we need reform, well, ‘duh,'” said Michael Steel, spokesman for House Minority Leader John Boehner. “But our proposal holds down costs, without the trillion-dollar government takeover.”

Brian A. Sassi, president of WellPoint’s consumer business, said in his letter to Ms. Sebelius that the increase only affects the individual market, about 10% of its business in California.

He said that despite an overall profit, the company, which does business as Anthem Blue Cross, suffered a 2009 loss in that market in California.

He said requiring people to buy health insurance would mitigate the problem.

In that sense, he and Mr. Obama are on the same side. The Democratic plan would require people to carry insurance.

Democrats say that is needed to keep prices down because it would bring more low-cost healthy people into the customer pool to balance out the sick people. Most Republicans call that requirement unconstitutional and a big-government intrusion.

WellPoint opposes other aspects of the pending Democratic legislation, said spokesman David Palombi.

He said the bills don’t have a severe enough penalty for people who fail to get insurance and don’t do enough to control health-care costs. But he agreed his company’s rate hike is a good argument for action.

“This really is a case study for the need for an individual mandate,” Mr.

Printed in The Wall Street Journal, page A6