Health insurer WellPoint Inc., parent of Anthem Blue Cross of Connecticut, blames a shift in demographics and rising medical costs for its planned 39 percent rate hike for some California customers.
In a memo obtained by The Associated Press, WellPoint tells Health and Human Services Secretary Kathleen Sebelius that because of the weak economy, healthy people are dropping coverage or buying cheaper plans.
The decline in premium revenue means there’s less money to cover claims from sicker customers who are keeping their coverage. That resulted in a 2009 loss for the unit. The insurer says its 2010 rates aim to cover the shortfall expected from the continuation of that trend.
WellPoint said a minority of customers will see 39 percent increases and that those customers have an option to choose plans with a lower premium but higher out of pocket costs.
The federal inquiry was launched earlier this week after the premium increase planned for some customers who buy individual policies from WellPoint’s Anthem Blue Cross subsidiary was widely publicized.
Congress also has asked for information on the increases and requested testimony from WellPoint CEO Angela Braly at a Feb. 24 hearing.
“When the healthy leave and the sick stay, that is going to dramatically drive up costs,” WellPoint executive Brian Sassi said in an interview with The Associated Press.
Sassi is president of the consumer business unit for WellPoint, the largest publicly traded health insurer based on membership. WellPoint runs Blue Cross and Blue Shield plans in Connecticut and 13 other states and Unicare plans in several others. (AP)
