Today, during a hearing before the House Energy and Commerce Health Subcommittee, Reps. Bart Stupak (D-MI) and Henry Waxman (D-CA) questioned WellPoint CEO Angela Braly about the company’s proposed rate increases in California’s individual health insurance market. The congressmen read from a series of inter-company emails which revealed that WellPoint was rising premiums to increase its profits and padding proposed increases to allow room for negotiations with regulators:
- “The average increase is 23 percent and is intended to return California to a target profits of 7 percent, versus 5 percent this year.” [WellPoint email, October 7, 2009]
- “We’re asking for premiums that would put us $40 million favorable…if we get the increases on time, we will see an opt gain upside of $30 million downgrades and rate cap.” [WellPoint email, November 2, 2009]
- “[W]e needed to reach agreement on filing strategy quickly — specifically in the area of do we file wth a cushion allowed for negotiations.” [WellPoint email, 10/24/2009]
Watch a compilation:
Waxman also unveiled a slide shown at a meeting of the companies’ shareholders which showed that the company had asked for a rate increase of 25 to 26% in 2010 “but the assumed rate increase is just 20%.” This seems to say that you’re asking for a 25% percent increase but expected to see that lowered to 20% through negotiations.” “You are raising your rates far above what’s necessary. You’re trying to squeeze every dollar of profit you can out of policy holders in California and across the nation at a time when families are struggling to pay their bills, you’re trying to charge them inflated rates that pad your profits and support the salaries and the trips and the retreats and everything else,” Waxman said.
WellPoint admitted that it set its increases to keep up with medical costs and maintain a 2% profit. The company justified the increases in California by arguing that it was making up for lost profits in the individual market– a point somewhat belied by the fact that WellPoint has also increased premiums in at least 11 other states. “We are talking about profit increases in absolute dollars but again, when you look at the profit margin that is build into the rates for 2010 it’s less than a 22% profit margin,” chief Corporate Actuary Cindy Miller explained. “A 25% rate increase became necessary…to achieve a profit margin of less than 2% on an after tax basis.”
“$2.8 billion that was your profit in 2009, which is a year that everyone would consider was a horrible year economically in this country…what I’m concerned about is that our hard working Americans are asking to increase their premiums to the wealth of WellPoint’s investors,” Stupak observed. “I don’t mind you making a profit but at the end of the year, 2009 a horrible year, you still made 2 point something billion dollars, and that’s not enough,” Stupak asked, noting that WellPoint’s high profit margin is the reason “many of us believe in a public option.”