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Sebelius urges states to get control of health insurance rate increases Posted: June 2nd, 2010

By Maryalene LaPonsie

For anyone who thinks that the government is not on their side, the flurry of activity coming out of the U.S. Department of Health and Human Services recently may make them think twice. Incensed at a California insurer's rate increase request that was later deemed excessive, Health Secretary Kathleen Sebelius has urged governors and insurance commissioners from every state to be on guard for similar requests.

Sebelius Urges Greater Scrutiny of Insurance Premiums

What happened to provoke the outcry from Sebelius? It began back in February when Anthem Blue Cross, an affiliate of WellPoint Inc., submitted paperwork in California to raise its rates by up to 39 percent. Each state maintains an insurance office that must review and approve health insurance rates.

When a red flag went up over Anthem's rate filing, Sebelius took notice. Her demand that the company justify its numbers resulted in the withdrawal of the increase request. In a press release, Sebelius stated, "Using faulty assumptions and loopholes, insurers have tried to game the system and consumers have ended up with one bad deal after another."

The Fight for Cheap Health Insurance

In the wake of the recent controversy, Sebelius drafted a letter to all 50 governors urging vigilance when reviewing insurance company rate increase requests. The letter, which was also sent to state insurance commissioners and superintendents, singled out WellPoint affiliates for greater oversight.

The California rate increase was said to be the result of mistakes in the numbers used when estimating future claims and medical insurance costs. It remains to be seen whether other states will find similar mistakes in other WellPoint rate filings. However, the mistake points to the need to conduct a thorough health insurance comparison to make the cheapest health insurance possible available to consumers.

Industry Response: A Distracting Mistake

Meanwhile, America's Health Insurance Plans (AHIP) has fired back at Sebelius. In a public statement, an AHIP representative chided the Health Secretary for her response. "An isolated actuarial error in a single state should not distract attention from the biggest challenge facing our health care system: Soaring prices for medical services."

Although WellPoint ultimately withdrew its request, WellPoint CEO Angela Braly testified before Congress that the rising cost of hospitalization, prescription drugs, and medical care was the underlying reason for higher insurance premiums. According to The Wall Street Journal, WellPoint plans to refile its proposed rates once it has corrected the mistakes.