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Feinstein Calls for Congressional Investigations into WellPoint/Anthem Blue Cross' Use of Flawed Data to Calculate Premium Rate Hikes

In letter to Chairmen of two key Senate Committees, Senator Feinstein stresses need for Rate Authority to review proposed health insurance rate hikes

Washington, DC - U.S. Senator Dianne Feinstein (D-Calif.) is calling for two key Congressional committees to launch investigations into WellPoint/Anthem Blue Cross' use of flawed data to calculate health insurance premium rate increases for policyholders in California.

In a letter to Senators Max Baucus (D-MT) and Tom Harkin (D-IA) - the Chairmen of the Senate Committee on Finance and the Senate Committee on Health, Education, Labor and Pensions (HELP), respectively - Senator Feinstein requested that the committees hold hearings to determine whether WellPoint used flawed data to determine rate hikes nationwide.

Senator Feinstein authored the Health Insurance Rate Authority Act of 2010, which would empower the U.S. Secretary of Health and Human Services to review and reject unfair premium rate increases like those formerly proposed by WellPoint/Anthem Blue Cross. The bill is co-sponsored by Senators Barbara Boxer (D-CA), Kirsten Gillibrand (D-NY), Jack Reed (D-RI), Bernard Sanders (I-VT), Sheldon Whitehouse (D-RI) and Bob Casey (D-PA).  Rep. Jan Schakowsky (D-Ill.) has introduced a companion bill in the House of Representatives.

            Below is the text of Senator Feinstein's letter to Chairman Baucus and Chairman Harkin:     

May 6, 2010

The Honorable Max Baucus                    The Honorable Tom Harkin
Chairman                                                    Chairman     
Committee on Finance                             Committee on Health, Education, Labor
United States Senate                                and Pensions
Washington, DC 20510                            United States Senate                     
                                                                       Washington, DC 20510

Dear Chairman Baucus and Chairman Harkin:

I write to request that your committees hold hearings and investigate the proposed premium rate increases by Anthem Blue Cross, a subsidiary of WellPoint, that were later found to be in error.  

As you know, Anthem Blue Cross filed rate increases of up to 39% for 800,000 individual policy holders in California, based on data from an independent actuarial firm.  Anthem Blue Cross argued these increases were “actuarially sound and necessary,” in that they reflected the expected medical costs associated with membership in the plans and satisfied the required state medical loss ratios.  Subsequently:

  • Anthem Blue Cross agreed to delay the rate increase while an independent review was conducted.
  • On April 28, 2010, an independent actuarial review by Axene Health Partners, LLC found that Anthem Blue Cross used several erroneous methodologies in their initial rate filings, resulting in increases that were larger than necessary.  According to this analysis, the 25% average increase changed by Anthem should have only been 15.2%.  The Executive Summary is attached.  
  • Anthem Blue Cross has now withdrawn the requested increases and will refile a new rate request.

Anthem Blue Cross’ reliance on a flawed actuarial data for premium increases raises concern about the validity of rate changes by WellPoint subsidiaries in other states, as well as in previous plan years.  It is critical to investigate:

  • Whether the same flawed actuarial model that was used by Anthem Blue Cross in California is used in other states.
  • If it is, how widespread is this problem nationwide, and for how many years has flawed data justified erroneous premium rate increases?

It is essential to investigate this particular rate increase, which we now know was at the very least flawed and to determine whether data and methodologies used by large, for profit insurance companies to raise premiums on American families.  I continue to press for the passage of legislation that would give the Secretary of Health and Human Services the authority to review potentially unreasonable increases in health insurance rates. 

In many states, regulators and consumers are forced to rely on the insurance companies’ assertions about what rates are fair and necessary.  As this California experience shows, a large insurance company can make serious mistakes on calculations, which cost consumers a significant amount of money.  Insurance companies are driven by the need to return profits to shareholder, and without proper regulatory oversight, will continue to raise rates and drop people from coverage to maximize their profits.

I hope that your committees will undertake a thorough investigation of Anthem Blue Cross’ actions in California and any related activities involving other states or other insurance companies.  I look forward to continuing to work with you to protect American consumers from unfair health insurance premium increases.


                                                            Dianne Feinstein