Administration steps up scrutiny of insurer WellPoint

By David S. Hilzenrath
Thursday, May 6, 2010

The Obama administration escalated a long-running battle with one of the nation's largest health insurers Tuesday night, calling on state governments to scrutinize any rate increase sought by WellPoint.

In a broader effort to combat "unjustified" premium increases, the administration also asked states to ensure their regulators have the authority to review rate hikes before they take effect.

Health and Human Services Secretary Kathleen Sebelius made the request after WellPoint withdrew a proposal to raise rates by as much as 39 percent for Californians with individual policies. California regulators determined that the proposed increase was based on erroneous assumptions.

The planned WellPoint rate increase had become a flash point in the final stages of the health-care debate, and the administration invoked it as an argument for the legislation.

"In light of this recent finding, I urge that, to the extent you have authority to do so, you re-examine any WellPoint rate increases in your state to determine whether any mistaken assumptions similar to those made in California were made in your state," Sebelius said in a letter to governors and state insurance commissioners. "Even small errors can mean unaffordable premiums for policyholders."

Sebelius said insurers will be forced to compete more directly on price beginning in 2014, when regulated marketplaces for the sale of insurance open for business.

"In the meantime, however, individual and small business insurance purchasers have little or no bargaining power and limited access to meaningful comparative price information," she wrote. "That's why state assistance is so necessary to prevent excessive rate increases."

A WellPoint spokesman declined to comment.

The new health-care law set aside $250 million to help states review insurance rates, and the federal government plans to issue guidelines soon on how states can apply for the funds.

Sebelius's letter is part of a campaign by the Obama administration to challenge the insurance industry over questionable practices and to demonstrate progress toward improving health care since the legislation was enacted.

Just as Democrats and Republicans fought over the legislation, they will be battling to shape perceptions of its impact in the run-up to the fall House and Senate elections.

"For too long in this country, Americans have been at the mercy of insurance companies, and have ended up paying a steep price," Sebelius said in a news release. Now, she added, the balance of power "is starting to shift toward the American people."

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