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76–009 2012

PREMIUM INCREASES BY ANTHEM BLUE CROSS 

IN THE INDIVIDUAL HEALTH INSURANCE MARKET 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

FEBRUARY 24, 2010 

Serial No. 111–97 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 


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COMMITTEE ON ENERGY AND COMMERCE 

HENRY A. WAXMAN, California, Chairman 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER S. MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

JERRY MCNERNEY, California 

BETTY SUTTON, Ohio 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 


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SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

BART STUPAK, Michigan, Chairman 

BRUCE L. BRALEY, Iowa 

Vice Chairman 

EDWARD J. MARKEY, Massachusetts 

DIANA DEGETTE, Colorado 

MIKE DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

DONNA M. CHRISTENSEN, Virgin Islands 

PETER WELCH, Vermont 

GENE GREEN, Texas 

BETTY SUTTON, Ohio 

JOHN D. DINGELL, Michigan (ex officio) 

GREG WALDEN, Oregon 

Ranking Member 

ED WHITFIELD, Kentucky 

MIKE FERGUSON, New Jersey 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 


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C O N T E N T S 

Page 

Hon. Bart Stupak, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 1 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 4 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 5 

Hon. Phil Gingrey, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 7 

Hon. Diana DeGette, a Representative in Congress from the State of Colorado, opening statement ...................................................................................... 8 

Prepared statement .......................................................................................... 10 

Hon. Parker Griffith, a Representative in Congress from the State of Alabama, opening statement .................................................................................... 12 

Hon. Bruce L. Braley, a Representative in Congress from the State of Iowa, 

opening statement ................................................................................................ 12 

Prepared statement .......................................................................................... 14 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 17 

Hon. Edward J. Markey, a Representative in Congress from the Commonwealth of Massachusetts, opening statement .................................................... 18 

Hon. Donna M. Christensen, a Representative in Congress from the Virgin 

Islands, opening statement ................................................................................. 19 

Hon. Betty Sutton, a Representative in Congress from the State of Ohio, 

prepared statement .............................................................................................. 20 

Hon. Peter Welch, a Representative in Congress from the State of Vermont, 

opening statement ................................................................................................ 21 

Hon. Janice D. Schakowsky, a Representative in Congress from the State 

of Illinois, opening statement .............................................................................. 21 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, prepared statement ...................................................................................... 101 

Hon. Baron P. Hill, a Representative in Congress from the State of Indiana, 

prepared statement .............................................................................................. 104 

WITNESSES

Jeremy Arnold, Los Angeles, California ................................................................ 23 

Prepared statement .......................................................................................... 25 

Julie Henriksen, Westchester, California .............................................................. 27 

Prepared statement .......................................................................................... 29 

Lauren Meister, West Hollywood, California ........................................................ 31 

Prepared statement .......................................................................................... 33 

Angela Braly, President and CEO, Wellpoint, Incorporated ................................ 54 

Prepared statement .......................................................................................... 57 

Cynthia Miller, Executive Vice President, Chief Actuary and Integration Management Officer, Wellpoint, Incorporated .......................................................... 75 

Prepared statement 1

SUBMITTED MATERIAL

Letter of February 17, 2010, from Mr. Dingell to the National Association 

of Insurance Commissioners ............................................................................... 106 

Letter of February 23, 2010, response from the National Association 

of Insurance Commissioners to Mr. Dingell ............................................... 108 

1Ms. Miller did not submit a prepared statement. 


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PREMIUM INCREASES BY ANTHEM BLUE 

CROSS IN THE INDIVIDUAL HEALTH INSURANCE MARKET 

WEDNESDAY, FEBRUARY 24, 2010 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, 

COMMITTEE ON ENERGY AND COMMERCE, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 10:03 a.m., in Room 

2123 of the Rayburn House Office Building, Hon. Bart Stupak 

[Chairman of the Subcommittee] presiding. 

Present: Representatives Stupak, Braley, Markey, DeGette, 

Schakowsky, Christensen, Welch, Green, Sutton, Waxman (ex officio), Capps, Eshoo, Hill, Burgess, Gingrey, and Griffith. 

Staff present: Phil Barnett, Staff Director; Kristin Amerling, 

Chief Counsel; Bruce Wolpe, Senior Advisor; Sarah Despres, Counsel; Purvee Kempf, Counsel; Naomi Seller, Counsel; Jack Ebeler, 

Senior Advisor on Health Policy; Stephen Cha, Professional Staff 

Member; Dave Leviss, Chief Oversight Counsel; Stacia Cardille, 

Counsel; Ali Golden, Professional Staff Member; Erika Smith, Professional Staff Member; Ali Neubauer, Special Assistant; Karen 

Lightfoot, Communications Director, Senior Policy Advisor; Elizabeth Letter, Special Assistant; Matt Eisenberg, Staff Assistant; 

Sean Hayes, Minority Counsel; Alan Slobodin, Chief Minority 

Counsel; Clay Alspach, Minority Counsel; and Garrett Golding, Minority Legislation Analyst. 

OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. STUPAK. This meeting will come to order. Today we have a 

hearing entitled ‘‘Premium Increases by Anthem Blue Cross in the 

Individual Health Insurance Market.’’ Before we begin, I ask unanimous consent that the contents of our supplemental memo be entered into the record. This supplemental report is in regards to our 

investigation in the small business health insurance market. We 

had a draft last night and I think it was just finalized today. And 

the company documents with that memo, there is a document binder I think we all have agreed on. So without objection, they will 

be entered into the record. I should also note for the record that 

members will be going back and forth 2 floors up. Consumer Protection and Trade Subcommittee is also having a hearing on telecommunications, which many of our members are members of both 


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subcommittees, and they will be going back and forth for this hearing. 

Right now the chairman, ranking member and chairman emeritus will be recognized for 5-minute opening statement. Other 

members of the subcommittee will be recognized for a 3-minute 

opening statement. I will begin. Today’s hearing is the fifth hearing 

in this Congress that our subcommittee has examined questionable 

business practices in the private health insurance market. One of 

the hearings we had last year examined the problem of under insurance. We heard stories about ordinary citizens who thought they 

had sufficient health insurance but learned that their policies were 

inadequate when they needed them most. 

We also looked into the problem of small businesses purging, 

which is when a health insurance company raises premiums to a 

point it is unaffordable for businesses to continue their health coverage. Lastly, we held 2 hearings on rescissions, which is the private insurance industry practice of terminating coverage after a 

policy holder becomes sick so the company can avoid paying expensive and much needed health care. Our hearing today will focus on 

rate increases in the individual insurance market in California. We 

will examine what is happening when insurance companies have 

no limitation or accountabilities under rate increases. While most 

Americans receive health insurance through their employer in a 

group market or through government-assisted programs such as 

Medicare and Medicaid more than 15 million Americans receive 

their health insurance through the private individual market. 

The individual health insurance market is unique in that companies are limited in their ability to spread their risk among a larger 

population. While today’s hearing will focus on WellPoint’s proposed premium increase in California, this is a national problem. 

According to a disturbing report released today by the Center for 

American Progress WellPoint has implemented or proposed double 

digit rate increases in 11 of the 14 states in which they operate. 

In Maine, WellPoint raised individual rates by 23 percent this 

years after 5 straight years of double digit increases for individual 

policy holders in that state. 

Likewise, Indiana residents covered by certain WellPoint policies 

will endure a rate increase of 21 percent. In Georgia, WellPoint policy holders face a 21 percent increase in 2009 and are anticipating 

a similar rate increase again this year. And in the west, Colorado 

expects average rate increases in WellPoint policies of nearly 20 

percent and as high as 24.5 percent this year. But as residents of 

my home state know, the problem is not limited to WellPoint subscribers. Some Michigan policy holders are facing a proposed rate 

increase of 56 percent in the individual market. 

On January 26 this year WellPoint sent out letters advising 

800,000 California policy holders of possible rate increases for the 

coming year. As it turns out, nearly 700,000 WellPoint subscribers 

received rate increases of as much as 39 percent. WellPoint has 

tried to justify their rate increases through a high profile media 

campaign reassuring policy holders, congressional leaders, and the 

Administration that the proposed rate increases are necessary due 

to rising medical costs and declining business resulting from economic difficulties, not from padding their bottom line. 


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Through our investigation, we discovered internal documents 

that suggest a closer relationship between the proposed premium 

increases and WellPoint’s profits. The documents reveal that 

WellPoint sought inflated premium increases as a negotiating tool 

with the California Department of Insurance. WellPoint also appears to be directing policy holders to less generous health insurance plans as a way to lower medical claims while awarding their 

executives excessive salaries and paying for lavish retreats. In our 

insurance rescission investigation last year, we learned that if an 

insurance company believes your illness may be costly, it will go 

back and re-examine your initial application to find an excuse to 

cancel your coverage. 

As health insurance industry executives brazenly told us this 

practice will continue until there is national health care reform to 

expressly prohibit it. In this case here, we are reminded of this sad 

fact. An internal WellPoint document tells us that the practice of 

rescission is a ‘‘key issue’’ for maintaining lower medical loss ratios. 

Our first panel will put a face on the frightening premium increases that have affected California. Lauren Meister received notice that WellPoint increased her rates by 38.6 percent. WellPoint 

offered her an alternative plan that does not cover the brand name 

medications she requires to treat a chronic condition. 

Julie Henriksen is a single mother with 2 children. WellPoint 

has proposed to raise her premiums by 30 percent. One of her 2 

sons was born with a hole in his heart and required open heart 

surgery at age 3, and now requires annual care from a cardiologist. 

If Lauren switches to the alternative plan WellPoint has offered 

she will have to pay $5,000 out of pocket before her insurance even 

kicks in. Jeremy Arnold has experienced rate increases on his 

WellPoint policy totaling 74 percent between 2009 and 2010. Anthem has proposed to increase his rates 38 percent this year. We 

will also be hearing from Angela Braly, the President and CEO of 

WellPoint. Accompanying her is Cynthia Smith, WellPoint’s Executive Vice President and chief actuarial. I look forward to their testimony to help this committee understand why WellPoint made the 

decision to raise premiums this year by up to 39 percent. 

Tomorrow the White House will be holding a summit to discuss 

the President’s newly released health care reform proposal. Included in this proposal is language granting the states the authority to regulate rate increases by private health insurers like 

WellPoint. This hearing could not come at a better time. It provides 

a frightful reminder that unless Congress and the Administration 

acts, Americans across the country will continue to experience 

large premium increases and will be priced out of the market. With 

limited or no health care coverage, we are all just one injury or illness away from bankruptcy. Next, I would yield to the gentleman 

from Texas, Mr. Burgess, and welcome him sitting officially as the 

ranking member now of the Oversight and Investigations Committee. I look forward to working with him throughout this Congress. And, Mr. Burgess, your opening statement, please. 


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OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. Thank you, Mr. Chairman. We will see if you still 

feel that way after a few months. I thank you and Chairman Waxman for allowing us to have this hearing today. I want to thank 

the witnesses who traveled far and wide to come and be with the 

committee today and to share their stories about the purchasers of 

health insurance and the people who provide health insurance. You 

know, it is odd, Mr. Chairman, you look around the room and you 

don’t see the insurance commissioner of the State of California, 

which really strikes me as odd in a hearing of this nature. If the 

reason for this hearing is to determine whether a state insurance 

company has violated a state’s regulations then you would think 

logically that the head of the state’s regulatory agency would be 

present and be with us. 

But here today we have Anthem, WellPoint’s California subsidiary, in a dispute with the California insurance commissioner. 

The evidence shows that Anthem submitted, as required, by California state requirements, their actuarial determinations as to why 

they needed to decrease premiums less than 20 percent as well as 

raise some premiums as high as 39 percent. The evidence also 

shows that the California state insurance commissioner did nothing 

with the actuarial information they were given by Anthem. They 

did not raise a single complaint for over 4 months. Now why the 

federal government is involved in a state issue, a state dispute, to 

me presupposes that the fundamental difference between the line 

of thinking between national Democrats and national Republicans 

in the health care debate. 

The central argument of the Democratic Party is that we need 

a national single federal regulator oversee all health insurance 

companies but Republicans believe fundamentally that insurance is 

a state issue and based on risk pools how many people get sick at 

one time versus how many healthy people there are who won’t get 

sick. So the actuaries look at the market place and determine this 

ratio. And, of course, we are involved right now in this tremendous, 

tumultuous health care debate or what used to be called a health 

care debate before the President renamed it health insurance reform, and that is why the timing of this hearing couldn’t be more 

coincidental. And just for the record, I never attribute anything to 

coincidence if it can be adequately explained by conspiracy. 

Tomorrow, the President is holding a bipartisan photo-op on 

health insurance reform at the White House, a 6-hour photo-op, so 

it is a significant photo-op, and his Secretary of Health and Human 

Services has used the state-based issue, the increase of Anthem’s 

in the State of California to increase support as another reason 

why we need a $1 trillion or $2 trillion health reform package. In 

fact, his Secretary of Health and Human Services has said that the 

profits of Anthem are outrageous, her words, and that the insurance companies should not make that much money. Why does profit matter if the actuaries have done their work? 

I will agree, a 39 percent premium is a huge number, a big, scary 

number but it may be irrelevant in this debate if the debate is on 

whether or not the business model of the insurance should be 

based on what the actuaries are determining is a risk spread. Now 


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I make no apologies for the insurance companies. They are certainly capable of defending themselves, and, if not, then they deserve what they get but I think a GAO report needs to be commissioned to study how the insurance companies determine how much 

they are going to charge with their premiums, but if the numbers 

show that there will be a precipitous decline in the number of people who are in the risk pool then any number, no matter how big, 

may in fact turn out to be acceptable. 

So if we are just focused on solving a dispute between California 

and Anthem, whose actuary is right, now wouldn’t that be a stimulating hearing? We could have dueling actuaries. If Anthem is 

right, their actuary portrayed an accurate risk for the State of California, or is the California Department of Insurance right to complain 4 months after the fact that Anthem is a bad insurance company. But, you know what, we are really not here to answer those 

questions. We are here to answer whether there needs to be reform 

in the health care industry as a whole. And I will tell you as a 

practicing physician for over 25 years, there needs to be. Costs are 

a problem. Yet, after months and months of debate, we really 

haven’t figured out how to answer the question of how do we bend 

the cost curve or actually we have figured out to bend it in the 

wrong direction. 

We haven’t determined whether these costs are conclusively attributable to the business practices of health care providers, who 

are sometimes impugned, or the insurance, who are often impugned, or whether these costs are attributable to what the First 

Lady is focusing on, lifestyle choices, diet, exercise, and the epidemic of obesity. Or maybe it is just that people are living longer 

and the cost of treating an older generation were never envisioned 

when we created Medicare back in the ’60s. And, of course, there 

is the advancing complexity of what we are able to do. The very 

fact that we have more than one cholesterol-lowering medication on 

the market is significant. What we can all agree on is there needs 

to be reforms in the health industry. Let us get rid of pre-existing 

conditions and lifetime caps. I am for that. Let us work on tort reform. How about increased competition? I could be for that. 

Increased flexibility and portability, who would be against that? 

How about some improvements for people who are stuck in the 

COBRA system so they are not stuck with such a high premium? 

I could be for that. But, you know, we are going to turn our attention to the President’s summit tomorrow. I hope the President, I 

hope the President is truly interested in including good ideas regardless from which side of the dais they emanate. I will yield back 

the balance of my time. 

Mr. STUPAK. Thank you, Mr. Burgess. Mr. Waxman, chairman of 

the full committee. Thanks for being here, and I look forward to 

your opening statement. 

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Chairman Stupak, thank you for convening this 

important and timely hearing. On February 4, the Los Angeles 

Times reported that Anthem Blue Cross, a subsidiary of WellPoint, 


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intended to raise its rates as much as 39 percent for their 800,000 

individual policy holders in California. And I want to single out 

Duke Helfon and Lisa Garrion, who are reporters who have done 

excellent work on this issue and brought to our attention the rescissions as well which has been a tactic used by those who cover 

individuals for insurance policies. By any measure, this was a 

breathtaking increase in health insurance costs. We are holding today’s hearing to find out what is really driving these enormous rate 

increases. 

WellPoint says the rate increases are a result of medical inflation 

and healthier policy holders dropping coverage. But the thousands 

of pages of WellPoint documents we have reviewed tell another 

story. They tell a story not about costs but about profits, not about 

increasing coverage but about reducing benefits to policy holders, 

not about removing barriers to coverage but about erecting new 

ones, not about covering more people who have illnesses, but about 

cutting them off and seeking out new customers who are healthier 

and wealthier. 

The documents also tell a story of potential huge new premium 

rate increases still to come. WellPoint says that its rate increases 

have nothing to do with increasing company profits, but an internal 

company e-mail says that its rate increase would ‘‘return California 

to target profit of 7 percent.’’ WellPoint says that its rate increases 

are absolutely necessary, but its internal company documents describe a plan to build in a cushion to allow for negotiations. The 

company told its board of directors that its average rate ask would 

be 25 percent but that its final rate increase would only be 20 percent. Other documents raised the possibility that WellPoint may 

have manipulated its actuarial assumptions to keep its medical 

loss ratio, a key measure reviewed by California regulators, flat. 

The documents we have reviewed show WellPoint is proposing its 

highest increases on its more generous plans, and at the same time 

it is actively developing new products called downgrade options 

that reduce benefits for its policy holders. As we will hear from the 

witnesses on our first panel, this purging process cuts coverage for 

WellPoint policy holders when they need it the most, when they get 

sick, and the WellPoint documents point to a future of even higher 

rate increases. WellPoint told committee staff that WellPoint voluntarily capped its maximum rate increase at 39 percent. Well, if 

WellPoint had not done this some policy holders could have faced 

rate increases of over 200 percent. 

Mr. Chairman, we have circulated a memorandum to members 

describing these documents, and I know they are now part of the 

record. One question we asked is where does all of this money go? 

We have learned that in 2008 WellPoint paid 39 senior executives 

over a million dollars cash each, and the company spent tens of 

millions of dollars more on expensive corporate retreats. During 

2007 and 2008, WellPoint spent $27 million on 103 executive retreats. One retreat in Scottsdale, Arizona cost over $3 million. Corporate executives at WellPoint are thriving, but its policy holders 

are paying the price. Ultimately, what this hearing will show is 

that the current system is absolutely unsustainable. If we fail to 

pass health reform, insurance rates will skyrocket and health inVerDate Mar 15 2010 06:19 Nov 09, 2012 Jkt 076009 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 E:\HR\OC\A009.XXX A009

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surance will become so expensive only the most healthy and the 

most wealthy will be able to afford coverage. 

Health insurers like WellPoint may get richer, but our nation’s 

health will suffer. We cannot go down this road forever. It is breaking our middle class and it will bankrupt our nation. We will learn 

much from today’s hearing, Mr. Chairman, and I hope we will 

apply these lessons when we meet at the White House tomorrow 

and in the days and weeks to come. We have got to reform the current health care system. Individual insurance seeks not to spread 

the cost but to exclude people from coverage so that they will not 

cost the insurance companies more money, and that is not insurance that is going to protect people who need it the most when they 

get sick. Thank you, Mr. Chairman. 

Mr. STUPAK. Thank you, Mr. Waxman. Mr. Gingrey, for an opening statement, please, 3 minutes. 

OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Mr. GINGREY. Thank you, Mr. Chairman. And, Mr. Chairman, I 

want to join with you and all of our colleagues in welcoming and 

congratulating my OB GYN colleague on our side of the aisle as the 

new ranking member of the subcommittee, and I congratulate Dr. 

Burgess. First off, these patients here today, they need reform, as 

do many patients who find it increasingly hard to afford health insurance or chronically ill patients who cannot find a policy because 

they are simply too sick to insure. The increases they receive especially in an economy like the one we are currently experiencing are 

tough to justify, and I would like to thank them for coming today 

and we look forward to your testimony. 

Throughout the past year, many in this Congress have seemed 

to operate in a bubble seemingly oblivious to the needs or the 

wants of their constituents because of ideological reasons. We started this Congress with the hope that we would work together to reform our health care system. What we ended up finding was a Congress more prone to closing doors than opening them creating special deals to, yes, buy Democratic votes instead of compromising to 

find Republican ones. I along with many of my colleagues continue 

to write the President and Democratic leadership offering my medical advice. Unfortunately, they have yet to respond. 

So whether it becomes a paycheck doesn’t bring home enough 

money to afford it or our sickest patients cannot access it, every 

American should have quality health care. A majority of Americans, and an overwhelming majority of Congress strongly agree 

with that sentiment. Yet, here we sit without a health reform bill 

because Washington continues to pursue a bill that they cannot sell 

to the American people. The Obama plan is the same bill with a 

few minor changes, notably changes that favor unions, increase 

cuts to senior’s health plans. If it was a popular bill, we would not 

be sitting here today. If it was a good bill, we would not be sitting 

here today. 

Mr. Chairman, the American people simply do not want the 

Obama plan. Every day that this Administration and this Congress 

spends in backroom meetings on the Obama plan is one day too 

many. I believe I can speak for every member of this committee 


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when I say that we can fix the problems in our health care system. 

The only thing standing in the way of that goal is a simple, yet inconvenient truth, the plan President Obama and Democratic leaders want is not what the American people want. Mr. Chairman, I 

believe that the Democratic majority has a decision to make. If 

they truly want health care reform, they will need to get rid of the 

bill that Americans don’t want. If they want bipartisan health reform, they will need to invite Republicans to work with them to 

help create legislation, not just invite them to review that has already been created and now, of course, plused up by another $100 

billion. 

Inviting Republican leadership to a televised meeting at the 

Blair House while secret meetings on the Obama plan continue at 

the White House is not the change that the American people want 

or will accept. I look forward to the witnesses’ testimony. And, Mr. 

Chairman, I will yield back as my time has expired. 

Mr. STUPAK. Thank you, Mr. Gingrey. Ms. DeGette for opening 

statement, please, 3 minutes. 

OPENING STATEMENT OF HON. DIANA DEGETTE, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF COLORADO 

Ms. DEGETTE. Mr. Chairman, I will submit my opening statement for the record. But I want to say I am offended by some of 

the things that my colleague from Georgia just said, and the reason 

why I am offended by them, it is one thing for us to disagree about 

the content of a health care bill. It is another thing to disparage 

people’s motives. Now there are a lot of motives to be disparaged 

on both sides of the aisle, but I will say every single member of this 

committee who has worked on this bill from Chairman Waxman to 

the ranking member to everybody else has worked hard on this bill. 

Now Mr. Gingrey and his colleagues may not like the bill that this 

committee passed, but they cannot deny that we spent hours of 

hearings in this committee and we spent hours of markups considering amendments from both sides. And if you don’t like the bill, 

that is just fine. That is not a partisan problem. That is a problem 

of not liking the bill, and I understand that. 

But I would ask that Mr. Gingrey and everybody else just quit 

painting everybody with the same broad brush because if we ever 

hope to restore a spirit of comity to this committee and this Congress attacks like that should not be countenanced on either side 

of the aisle. I want to say one more thing. There really is a problem 

here that we are trying to deal with, and I don’t think anybody in 

this room would disagree with that. As the chairman said, there 

are proposed rate increases by Anthem Blue Cross in California, in 

Michigan, in Connecticut, in Maine, in Oregon and Rhode Island, 

and 20 percent in my home state of Colorado. Now today on the 

floor they are going to have a bill repealing the antitrust exemptions of the McCarran-Ferguson Act. 

Only 2 industries currently enjoy those exemptions, and that is 

the health care industry and major league baseball. I guess we can 

talk about major league baseball later this year. But if we want 

more competition, it would seem to me that this would be a good 

start, and I would hope my friends on both sides of the aisle would 


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vote for this bill. In the meantime though to deny that there is a 

problem to say, well, you know, the insurance companies because 

medical costs are going up have to increase their premiums like 

this is denying the fact that my constituents and everybody in this 

room constituents cannot buy insurance policies on the individual 

market because they cannot afford to pay these rate increases. 

And I have people come to me every day and talk to me about 

this. Some of them are related to me, and I am sure everybody in 

this room has experienced those same issues. So, you know, my 

view—and I have worked with Mr. Gingrey. I have worked with everybody in this room. They know that I am not particularly a partisan person, that I try to work on these issues in a bipartisan way. 

So I would say on both sides of the aisle let us cut it out. If we 

don’t like each other’s bills, let us just debate against the bills. Let 

us stop disparaging their motives. And I yield back. 

[The prepared statement of Ms. DeGette follows:] 


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0&1 Hearing: Premium Increases by Anthem Blue Cross in the Individual 

Health Insurance Market 

Congresswoman Diana DeGette 

February 24, 2010 

Opening Statement 

Thank: you, Mr. Chairman. I am extremely bothered by the need for today's 

hearing. 

While we are focusing primarily on the proposed increase by Anthem Blue Cross 

in California, I want to reiterate that this is a nationwide problem-proposed rate 

increases of 56 percent in Michigan, 24 percent in Connecticut, 23 percent in 

Maine, 20 percent in Oregon, 16 percent in Rhode Island, and 20 percent in my 

home state of Colorado. 

I am sure many of the people here today have read Secretary Sebelius' report on 

the recent premium increases, but I want to reiterate two points from the report that 

are simply unacceptable. 

1) Almost 75 percent of individuals who look for a plan on the individual 

market never actually purchase a plan, and 61 percent of those individuals 

cite high premium costs as the primary barrier for obtaining coverage. 

2) We cannot deny that health care costs are rising, and it is certainly 

reasonable for rates to keep pace with rising costs, some of the proposed 

premium increases are 5 to 10 times higher than the growth rate of national 

health expenditures. 
11 


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I believe we need is an overarching requirement on a national level to ensure that 

insurance companies spend a certain amount on direct medical care as opposed to 

marketing and Executive Compensation. 

We also need to enact the sunshine provisions included in the House-passed health 

reform bill, which would require insurance companies to provide public 

justification for any rate increases. If insurance companies are going to impose 

drastic premium increases, consumers should have a right to the information 

necessary to make an educated assessment about how their insurance provider does 

business and decide whether they will remain customers of a particular provider. 

Let transparency and competition guide consumers so they can determine whether 

to continue enrolling in such a plan or look elsewhere. 

This hearing today simply underscores the need to pass comprehensive health 

reform in a timely manner. If, for example, health care costs are increasing so 

much that a 39 percent increase is warranted-as Anthem Blue Cross and 

WellPoint claim-then we need to fmd ways to change incentives within the health 

care system and reduce health care costs as quickly as possible. 
12 

Mr. GINGREY. Mr. Chairman, since Ms. DeGette mentioned my 

name, can I have 30 seconds to respond? 

Mr. STUPAK. No, let us move on. We are not going to go back and 

forth. We will have an opportunity later. Maybe Mr. Griffith can 

yield you some time, but yield now to Mr. Griffith for 3 minutes 

for an opening statement. 

OPENING STATEMENT OF HON. PARKER GRIFFITH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF ALABAMA 

Mr. GRIFFITH. Thank you very much for the opportunity, and I 

certainly appreciate being here. The good news about health care 

reform is that everyone would like to see it happen. The discussion 

of how it might happen has certainly been ongoing and will continue to be ongoing. One of the bills that was passed this year that 

I think got not as much applause as it should have was the FDA’s 

ability to control tobacco, a huge, life saving bill in and of itself. 

That in and of itself was health care reform, and I think Chairman 

Waxman needs to be proud of that. And I know as a cancer specialist, I am certainly proud of it. 

One quick comment is that in order to reform health care, we 

must understand we cannot reform it around a shortage, and the 

shortage are MDs. There is a difference between coverage and access. We have millions of Americans covered today who can’t access 

health care because we don’t have enough providers to take care 

of them. So if we gave everyone in America a little card that said 

USA health care our emergency rooms would still be just as busy 

as they are, just as crowded. We would still have just as much 

trouble getting our Medicare and Medicaid and our pediatric patients seen, and so any part of reform or improvement in health 

care must include a major increase in the number of medical 

schools, a major increase in the number of young men and women 

who are entering medical school, and we need to increase our midlevel providers, our nurse practitioners. We must increase their 

ability to see our chronically ill and do education. 

Half of all deaths in America over the next hundred years will 

be lifestyle-related. There will be smoking, overeating, not enough 

exercise, unrelated to infection or malignant disease. Thank you, 

Mr. Chairman. 

Mr. STUPAK. Thank you, Mr. Griffith. And I should say welcome 

to the committee. It is your first time with us. Welcome to the committee. Next is Mr. Braley for an opening statement. 

OPENING STATEMENT OF HON. BRUCE L. BRALEY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA 

Mr. BRALEY. Thank you, Mr. Chairman. Even though the focus 

of this hearing is on rate increases by Anthem Blue Cross what we 

are really talking about is a problem that affects people all over 

this country because it is not a new problem and the point has 

been raised about health insurance reform versus health care reform. I have always stressed the need for comprehensive global 

health care reform, and we cannot afford as a country not to move 

forward with health care reform. Even though this hearing is focused on Anthem Blue Cross in the State of California, this very 

same issue is facing my constituents in Iowa. Last week, Well 


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13 

Mark Blue Cross/Blue Shield, the largest health insurer in Iowa, 

announced it would raise rates an average of 18 percent for Iowans 

who buy their own health insurance, and that is expected to affect 

about 80,000 Iowans. Some of them will see their rates go up over 

20 percent. 

According to Well Mark, this is the largest annual increase since 

2006 and the troubling rise in premiums comes on top of an average 9.3 percent increase for individual policy holders last year, and 

a 54 percent increase in rates for individuals over the past 5 years. 

So when asked about this, the company spokesman noted that this 

was not related to anything that we don’t already deal with and 

blamed increase in chronic conditions such as obesity and knee and 

hip ailments as well as the price of prescription drugs and high 

tech medical imaging. 

And this is what is very fascinating. He also said the real way 

to make insurance more affordable is to lower health care costs and 

require everyone to have insurance, which is one of the very points 

that we have been struggling with in this debate over how we address the problem of providing access to health care coverage for 

millions of Americans. So I think Iowans want to know exactly why 

companies like Well Mark and WellPoint are raising rates on these 

individual plans and what factors went into their decisions because 

everyone who is affected by this deserves a detailed justification for 

the increases from their insurance companies. They deserve to 

know that their elected officials are working to ensure appropriate 

and adequate oversight and regulation of the insurance industry 

and working to ensure that they have access to quality affordable 

health care. 

That is why I believe this hearing is a good first start, but it is 

also one more example about why we need comprehensive health 

care reform in this country. All Americans deserve access to quality 

affordable health care coverage as soon as possible, and unless we 

look at all the contributing factors including unregulated high increases in health insurance premiums, which have been going on 

for decades in this country, we are never going to get at the root 

of the problem and that is why I look forward to the testimony of 

our witnesses. And I yield back. 

[The prepared statement of Mr. Braley follows:] 


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v.;,·t .. _,Oval""" Statement of Congressman Bruce Braley .=:-i.,5200"i. ,l,liOiNVESTI~nOtfflSu&tX».lMI1'TEE Committee on Energy and Commerce '''I!03)5571324 

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"Premium Increases by Anthem Blue Cross in the Individual 

Health Insurance Market" 

February 24,2010 

Thank you, Chairman Stupak, for holding this important hearing 

today on premium increases by Anthem Blue Cross in the individual 

health insurance market. While this hearing is focused primarily on 

the premium rate increases by Anthem Blue Cross in the state of 

California, this same issue is also affecting my constituents in Iowa. 

Last week, Wellmark Blue Cross Blue Shield, Iowa's largest 

health insurer, announced it will raise rates an average of 18 percent 

for Iowans who buy their own health insurance. This is expected to 

affect about 80,000 Iowans. Some Iowans will see their rates go up 

by over 20 percent. 

According to Well mark data, this is the largest average annual 

increase since 2006. This troubling raise in premiums comes on top 

of an average 9.3 percent increase for Well mark individual policy 
15 


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holders last year and a 54 percent increase in rates for individual 

policies over the past five years. 

I'm seriously concerned about this announcement and about 

what these premium increases will mean for the thousands df Iowans 

with individual health insurance plans who will now have to pay more 

for health insurance. Especially during these tough economic times, 

working families in Iowa and across the country can't afford these 

drastic rate increases. 

I think Iowans deserve to know why exactly Well mark Blue 

Cross Blue Shield is raising the rates on their individual health plans, 

and what factors went into this decision. Iowans, like all Americans 

across the country who are seeing their insurance premiums 

skyrocket, deserve a detailed justification for these increases from 

their insurance companies. 

Most importantly, Americans affected by these rate increases 

deserve to know that their elected officials are working to ensure 

appropriate and adequate oversight and regulation of the insurance 

industry, and working to ensure that they have access to quality, 

affordable healthcare coverage. 
16 


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This hearing is a good first step in providing oversight of 

Anthem Blue Cross, and I look forward to working with my colleagues 

on the Subcommittee to ensure sufficient oversight of other 

companies in Iowa and around the country that are also raising 

premium rates. This hearing is also just one more perfect example of 

why we need comprehensive healthcare reform in this country, and I 

intend to continue to work with my colleagues in Congress to ensure 

that all Americans have access to quality, affordable healthcare 

coverage as soon as possible. 

Thank you again for holding this important hearing today_ I look 

forward to hearing the testimony of the witnesses. 
17 

Mr. STUPAK. Thank you, Mr. Braley. Mr. Green, for an opening 

statement, please. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Mr. Chairman, I want to thank you for holding this 

hearing today on the recent individual health insurance policy increases proposed by WellPoint and Anthem Blue Cross/Blue Shield 

in California. Millions of Americans do not have insurance through 

their employers or through public programs and they turn to the 

individual insurance market to purchase an insurance policy. Individuals who purchase insurance through the individual market 

must go through sometimes a difficult application process and often 

they are denied coverage through pre-existing conditions. Even if 

they are approved for coverage, they cannot afford the premiums 

in the individual market. We do know that in tough economic times 

like these health individuals drop their coverage to save money because health premiums across the Board are too high, and because 

of this occurrence could reduce this risk pools so significantly that 

extreme premium increases are necessary for those individuals who 

want to maintain their individual policies. 

At least that is the explanation given by WellPoint President and 

CEO Angela Braly to HHS Secretary Sebelius when asked to explain skyrocketing premium increases in California. There are not 

enough healthy people in Anthem Blue Cross/Blue Shield individual market and 39 percent premium increase is necessary for 

Anthem to continue to provide coverage in that area. The data 

emerges from the National Association of Insurance Commissioners 

clearly showing that enrollment in Anthem BCBS in California increased from 583,967 individual policies at the end of 2008 to 

627,082 individual policies at the end of the third quarter of 2009. 

That is an increase of over 7 percent in the individual market for 

Anthem in California alone, so a high rate increase because of reduced pool doesn’t make sense. 

It appears to me that the insurance industry’s dirty little secret 

drastically increasing individual policy rates without justification 

and running rough shod over consumers has finally been given the 

public attention it deserves. Companies and Anthem Blue Cross/ 

Blue Shield has been trying to get away with these outrageous type 

increases in Michigan, Rhode Island, Washington, and Maine, just 

a few. Unfortunately, states like Texas have very little we can do 

to prevent these rate increases going into effect, and are often at 

the mercy of the insurance companies, and that is historically true 

in Texas. Today, we are finally telling the insurance industry that 

the party is over. You have been making astronomical profits in the 

individual market off the backs of the sick and working folks who 

don’t have an option but to obtain health insurance, but in the individual market it has gone on too long. 

Both the House and Senate reform bills contain provisions to 

give state and HHS Secretary the ability to review health insurance premium increases and the President’s proposal takes this one 

step further by creating oversight of insurance premiums at the 

federal level. If individuals continue and cannot afford health insurance they end up in the emergency room forcing the health care 


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system and the taxpayer to pay for their expenses, yet the insurance companies continue to see increased profits while making it 

nearly impossible for individuals to gain access or to afford a policy. 

These hearings highlight we desperately need insurance reform 

and health insurance reform in our country. All individuals should 

have access to quality and affordable health insurance. And, Mr. 

Chairman, we are not seeing that in our country. Otherwise, insurance reform wouldn’t be needed, but we know in my particular district 43 percent of my constituents who are working don’t have insurance through employers so they don’t have a group plan so they 

have to go to the individual market, and I yield back my time. 

Mr. STUPAK. Mr. Markey, for an opening statement. 

OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN CONGRESS FROM THE COMMONWEALTH 

OF MASSACHUSETTS 

Mr. MARKEY. Thank you, Mr. Chairman, very much. Many people think that health insurance reform doesn’t matter to them because they already have health insurance. Skyrocketing premiums 

and insurance company abuses, however, reveal a different story. 

Medical bills are the leading cause of personal bankruptcies in the 

United States today. In 2009, 60 percent of all people who declared 

personal bankruptcy did so because of their medical bills, and 80 

percent of those people actually had health insurance. They just 

weren’t covered or what it was that ultimately came to become the 

disease that affected them or their family. People just discovered 

they weren’t covered. 

It is appalling that over the coming weeks and months when 

many Americans sit down to pay their bills, they will open a letter 

from their health insurance company informing them that their 

premiums will increase by 14, 22 or even 39 percent. Last week, 

I spoke with a small retail business owner named Diane Otnesio 

from Woburn, Massachusetts in my district. She recently got a letter from her insurance company saying that her health insurance 

premium is jumping 32 percent from $494 per month to $652, and 

her husband had the same increase. So this is essentially a 30 percent increase, and she says to me personally my small business is 

struggling to survive and I am expected to pay an extra $158 for 

the same health plan. It is making an already difficult economic 

situation even worse. 

People like Ms. Otnesio are doing the right thing and faithfully 

paying their health insurance premiums, but it is becoming increasingly difficult when some insurance companies are jacking up 

premiums and experiencing huge profits. In the midst of this economic crisis, WellPoint, the parent company of Anthem Blue Cross, 

recorded a $2.3 billion increase in annual profits. That is a 91 percent increase compared to the company profits in 2008. Did that 

jump in profits mean that WellPoint covered more of their customers’ medical costs? No. In fact, their contribution to medical expenses of their customers decreased by 1 percent. Did this rise in 

profits lead to an appropriate reduction in premiums? No. Anthem 

Blue Cross is considering raising individual health insurance premiums by as much as 39 percent. 


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And, sadly, Anthem Blue Cross is not an isolate case. Last week, 

Health and Human Services Secretary Sebelius released a report 

showing that health insurance companies in 6 other states proposed outrageous increases in health insurance premiums. There 

could not be a more important hearing, Mr. Chairman. I thank you 

for having it. It goes right to the heart of the anxiety that millions 

of Americans all across our country are feeling right now as we sit 

here in this hearing room. Thank you. 

Mr. STUPAK. Thank you, Mr. Markey. Ms. Christensen, for an 

opening statement, 3 minutes, please. 

OPENING STATEMENT OF HON. DONNA M. CHRISTENSEN, A 

REPRESENTATIVE IN CONGRESS FROM THE VIRGIN ISLANDS 

Mrs. CHRISTENSEN. Thank you, Mr. Chairman. Amid the reports 

of record breaking profits in the insurance industry almost 3 million more people in this country lost their coverage. So I want to 

thank you, Chairman Stupak and Ranking Member Burgess, for 

having this oversight hearing on what proposes to be an extreme 

increase in insurance premiums. This morning, we are looking at 

what is happening in California but premium increases every year, 

year after year, are hurting American families and increasing the 

ranks of the uninsured, exactly the opposite direction this country 

ought to be moving in. Over the years, I have worked with 

WellPoint, and I applaud the work that they have done in diversity 

and wellness programs and other areas, but I am alarmed by the 

proposed 39 percent increase in premiums. 

Despite the reasons that they offer, I do not see that they support the need for these premium increases, and I cannot support 

them. WellPoint is among the big 5 who enjoyed a combined profit 

of $12.2 billion last year. I don’t grudge them the profits. They are 

in the business to achieve profits, but ordinary folks, your clients 

and others, are having to make unsustainable sacrifices to keep 

health insurance and to make ends meet. I cannot see why keeping 

the premiums where they are, having been raised about 20 percent 

last year, would be an even comparable sacrifice for WellPoint or 

its shareholders because as I see it they would still realize substantial profits. 

We welcome WellPoint’s support for health care reform. Indeed, 

in a very real way this Congress’ failure to pass meaningful legislation such as we passed in this committee last year is a major part 

of the problem we are discussing today. It is time for our Republican colleagues to stop blocking what we and the other committees 

passed at the long hearings and markups and which everyone was 

involved. So anyone who goes to the White House tomorrow without a determination to insure everyone, to provide equitable health 

care to everyone, including those living in the territories, and reduce health care costs should get out of the way and let others who 

will do what has to be done sit in their chair. 

If there is anything that WellPoint and those of us on this side 

of the dais can agree on, it is that we might not be here having 

this hearing today if the President had signed the kind of legislation this House passed last year. I want to welcome those who are 

here to testify this morning, both the customers of WellPoint and 

the officials of WellPoint, and I look forward to your testimony. 


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Mr. STUPAK. Thank you. Mr. Welch, for an opening statement. 

He stepped out. Ms. Sutton, opening statement. 

OPENING STATEMENT OF HON. BETTY SUTTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Ms. SUTTON. Thank you, Mr. Chairman. Thanks for holding this 

hearing today. I would like to be able to say that I am shocked that 

we are talking about this, but sadly I am not. While I understand 

that this hearing focuses primarily on Anthem Blue Cross in the 

California market unfortunately as we heard here the situation is 

not unique. Across this country millions of Americans, affecting 

both individuals and businesses, are being devastated by shocking 

increases in their health insurance premiums. And let us be clear, 

health insurance companies have been socking it to the American 

people and businesses for years. Health Care for America Now recently released a report that found that in 2009 the health insurance industry had record profits. 

Let us just think about that. In 2009, a year when the average 

American family suffered unlike any year in recent history, health 

insurance companies still had record profits. And according to the 

report the 5 biggest for-profit health insurance plans had combined 

profits of $12.2 billion in 2009, up 56 percent from the year before. 

According to a Health and Human Services report, over the last 9 

years profits at the largest insurance companies increased 10 times 

faster than inflation, and over the last decade the amount private 

insurance companies spend on administrative costs, administrative 

costs, instead of paying claims and covering care, the amount that 

they spent on administrative costs grew faster than the amount 

they spent on prescription drugs as well. 

Premiums continue to skyrocket but consumers don’t receive additional benefits or care. These increased premiums mean families 

have to make untenable choices. They are forced to sit down and 

weigh their chances of getting cancer or getting hit by a bus 

against having to pay an insurance premium that is now suddenly 

30 percent higher, sometimes higher than their mortgage. Choosing 

to pay the higher premium means they may not be able to pay 

their heating bill or other basic life necessities or send their children to college, or sometimes it means choosing, if you can even 

call it a choice, to not have health insurance. This is not a situation 

that should occur in the United States of America. 

And this why we have heard a lot about health care reform. The 

Affordable Health Care for America Act that was passed by the 

House contained an 85 percent medical loss ratio, which would require insurance companies like Anthem Blue Cross, WellPoint, to 

be held accountable to consumers when they do not spend enough 

of their premium revenue on actual health benefits. The days of 

health insurance companies putting profits before people need to be 

over. I am sad that we are sitting here to discuss this today but 

the American people, they need answers, and it is time for 

WellPoint to explain why they are raising premiums in this way, 

especially right now. And I yield back. 

Mr. STUPAK. Thank you. Mr. Welch is here. Opening statement. 


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OPENING STATEMENT OF HON. PETER WELCH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF VERMONT 

Mr. WELCH. Thank you, Mr. Chairman. These premium increase 

requests really are just the latest effort on the part of the insurance industry to preserve and protect its business model, and it is 

a business model that served them extremely well with record profits and record salaries but has imposed real harsh consequences on 

individuals in America and our businesses that are trying to provide health care to their citizens. It is not sustainable. There is 

nothing really to talk about. How possibly can a family or a business cope with an envelope that arrives telling them that the cost 

of health care is going to increase 40 percent. And Anthem, 

WellPoint, always has an excuse, always has an explanation, that 

is ‘‘the cost of health care.’’ But essentially what the insurance industry has done, unfortunately, with a good degree of success, is 

block any systemic reform which this country needs in order to 

have a health care system that is affordable and accessible. 

It is pretty astonishing when you look at what the premium increases has been, 26 percent between 2003 and 2008 for single policies, 33 percent for family policies. The 10 largest health insurers 

saw their profits balloon from $2.4 billion to $13 billion in 2007. 

And as the member from Ohio was saying, the amount paid to 

health providers has gone from 95 percent in some cases to 74 percent. That has enabled some companies to pay executive salaries 

in the range of $24 million. In my own small state of Vermont 

when the CEO of Blue Cross left, he got a $7.2 million golden parachute. That came out of rate increases. It came out of businesses 

that were struggling with the decision about whether they were 

going to cut workers or cut their benefits, a decision our employers 

don’t want to make. 

So if I have a complaint about the insurance industry, it is not 

the individual rate increases. It is the consistent effort to stand in 

the way of health care reform so that the folks in this country, the 

businesses in this country, can have some confidence that they are 

going to get affordable and accessible health care. Health care is 

not about being in service of the insurance industry. The insurance 

industry should be about being in the service of helping us have 

access to health care. I yield back. Thank you, Mr. Chairman. 

Mr. STUPAK. Thank you, Mr. Welch. Last, but not least, Ms. 

Schakowsky, opening statement, please. 

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. When I saw the 

latest stories out of California about Anthem Blue Cross’ decision 

to raise rates, I knew, my constituents knew, this is not an isolated 

incident. It is just the most recent example of what the insurance 

companies are doing to policy holders across the country. This committee has known for some time that arbitrary rate increases are 

a real threat to health access. Last summer, 12 of my colleagues 

and I successfully offered an amendment to the health reform bill 

to prevent excessive premium hikes like the one we now see from 

Anthem. We passed legislation requiring prior approval of large 


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rate increases. And I am glad the President has now called for 

strong rate review regulation in his proposal for comprehensive reform, and I look forward to ensuring that what started as an 

amendment in this committee becomes law. 

I have heard from my constituents in my district asking that we 

not limit our investigation to California or to Anthem. They have 

sent me policy statements and renewal notifications highlighting 

years of high premiums. They have described the tough choices 

they have had to make, agreeing to high deductibles in an effort 

to maintain coverage, and yet the increases keep coming and coming. Illinois, like 25 other states, does not require prior rate approval of premium increases, and there is no authority to reject or 

deny excessive rate increases. So my constituents are turning to 

me, to Congress, to act to protect them. 

In addition to those stories, I have heard cases from my district 

showing that these trends are not confined to the individual market. From a community health center in my district in the process 

of renewing their Blue Cross/Blue Shield group policy, they are 

looking at an across the board double digit premium hike this year, 

and they are being forced to pay higher co-pays for things like 

emergency room visits or to see a specialist. Congress has taken repeated action to increase funding for community health centers. 

That money was intended to provide quality access to health care 

for our most vulnerable populations, not to pay insurance company 

premium hikes. 

Families are forced to make extremely tough choices when faced 

with an unexpected 39 percent increase in their budget and their 

personal stories only emphasize the need for comprehensive health 

reform that brings greater access and affordability to our health 

care system. I would like to close by thanking the witnesses for 

their participation in today’s hearing and look forward to their testimony. I yield back. 

Mr. STUPAK. Thank you. That concludes the opening statements 

from all members of the subcommittee. I should note, and I appreciate the fact, that Ms. Eshoo from California is here, and I am 

sure when we get to questions she will probably have a question 

or two. And Ms. Capps was also here, who just had to step out. As 

I said, we have two hearings going, one on the third floor and one 

here, and members are going back and forth. But members of the 

full committee of the Energy and Commerce Committee who may 

not be a member of this subcommittee will be allowed to ask questions at a later time of witnesses. So that concludes the opening 

statement by members of the subcommittee. 

We have our first panel of witnesses before us. They are Lauren 

Meister, who is from West Hollywood, California, Ms. Julie 

Henriksen, who is from Los Angeles, California; and Mr. Jeremy 

Arnold, who is also from Los Angeles, California. It is the policy 

of this subcommittee to take all testimony under oath. Please be 

advised by the rules of the House that you are allowed to be advised by counsel during your testimony. Do you wish to be represented or advised by counsel during your testimony, any of our 

witnesses? All shaking their heads no, so we will take that as a no. 

Therefore, I am going to ask you to please rise and raise you right 

hand and take the oath. 


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[Witnesses sworn.] 

Mr. STUPAK. Let the record reflect that the witnesses have replied in the affirmative. They are now under oath and they will 

begin with an opening statement. I would ask Mr. Arnold if you 

would not mind going first. Pull that mike up, press a button, the 

green light should go on, and you need to keep that mike fairly 

close to your voice in order to project your voice. Begin, please. 

TESTIMONY OF JEREMY ARNOLD, LOS ANGELES, CALIFORNIA; 

JULIE HENRIKSEN, WESTCHESTER, CALIFORNIA; AND 

LAUREN MEISTER, WEST HOLLYWOOD, CALIFORNIA 

TESTIMONY OF JEREMY ARNOLD 

Mr. ARNOLD. Thank you. Good morning, Mr. Chairman, and 

members of the committee. I am an Anthem Blue Cross policy holder, who has been directly impacted by Anthem’s astonishing proposed rate increases in California. Because I work as a self-employed writer and also have an additional part-time job, I have had 

to purchase individual health insurance. Two weeks ago, Anthem 

informed me that the premiums on my rate plan PPO 40 policy 

were going up 38 percent from $231 to $319 a month. This follows 

an increase exactly 1 year ago of 26 percent when my rates went 

up from 183 to 231 a month. In other words, my premiums are 

poised to rise to a level that is a whopping 74 percent higher than 

barely over a year ago. 

This is outrageous. My benefits have not improved in any way, 

and I don’t go to the doctor that often. Last year, I went a handful 

of times and paid about $1,250 in medical bills. As per the terms 

of my policy, Anthem paid a balance of about $1,600 in claims, far 

below the $2,700 in premiums I paid Anthem. I did also take prescription drugs, including a generic and a brand name medication, 

to manage high cholesterol and blood pressure related to a mild 

heart condition that I developed after I joined Anthem. Those 2009 

drug costs were subject to a separate $500 brand name deductible. 

In its notice to me last month, Anthem offered to switch me to 

a plan with a lower increase in premiums, but one which does not 

include brand name drug coverage. That is unacceptable to me 

since I need that coverage to treat my condition. There are other 

Anthem plans I could try to switch to. Some of these require underwriting in which case my pre-existing condition would probably 

make me ineligible. Some don’t require underwriting but carry high 

deductibles, lower lifetime maximums, and very poor prescription 

drug coverage. If Anthem goes ahead with its desired rate increase, 

I will not only be driven to one of these high deductible policies, 

I will have to hope that I don’t get sick or injured. Hope is not an 

effective health care policy and hope is not what Anthem is supposed to be selling. I eat right. I exercise. I take care of myself. I 

am generally a healthy person and I resent being squeezed in this 

way. 

Anthem tries to justify these rate hikes by citing rising medical 

costs. This is disingenuous. If insurance companies believe that 

medical costs are out of control, they should fight them rather than 

simply passing them off to ordinary Americans. Anthem and 

WellPoint’s recent astronomical profits are repellants because they 


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24 

are at the expense of breaking the backs of people like me. I have 

no problem with corporate profit making, but I do have a problem 

with profiteering, especially when it is at a level that penetrates 

so far into the economic and social well-being of our country that 

we Americans are discouraged from pursuing dreams and starting 

businesses and are stuck in undesired jobs simply because we 

worry about losing our health insurance or being able to afford it 

for our employees. 

This is wrong. It is insane, and it must be fixed by doing whatever it takes to pass meaningful health reform now. It would be 

simplistic to think that Anthem’s corporate greed is the only problem here though it is a huge one that I believe requires stringent 

regulation. Sharing the blame are indeed hospitals and doctors 

raising rates far above what is defensible, and a legislature that is 

too beholding to special interests and consumed with partisan rhetoric to take necessary action. All these parties feed off each other 

to conveniently and happily line their own pockets or win elections 

while blaming the other side and caring not a wit about the rest 

of it. 

In conclusion, I want to say to Anthem and the insurance companies, including WellPoint President Angela Braly, to hospitals and 

medical providers, and to legislators on both sides of the aisle, I 

ask you all in words that are as true today as they were in 1953 

when Joseph Welch first said them, have you no sense of decency 

at long last, have you left no sense of decency? Thank you. 

[The prepared statement of Mr. Arnold follows:] 


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Written Testimony to House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

By Jeremy Arnold 

February 24, 2010 

I am an individual health insurance subscriber who has been directly impacted by 

Anthem Blue Cross's astonishing proposed rate increases in California. 

Because I work as a self-employed writer and also have an additional part-time 

job, I have had to purchase individual health insurance. At the beginning of 2009, the 

premiums for my Right Plan PPO 40 policy were $183 per month, or $2196 per year. In 

March 2009, Anthem raised those premiums to $231 per month, or $2772 per year - an 

increase of 26%. Anthem last year also increased my prescription drug co-pay for both 

brand-name and generic drugs. In January 2010, Anthem informed me that my rates 

were going up again, to $319 per month, or $3828 per year- a further increase of38%. 

Compared to what I was paying just 13 months ago, therefore, Anthem is attempting to 

raise my premiums by a whopping 74%. 

This is outrageous. My benefits have not improved in any way, and I don't often 

go to the doctor. Last year I went a handful oftimes and paid about $1250 in medical 

bills. Anthem paid a balance of about $1600, far below my $2700 in annual premiums. I 

did also take prescription drugs, including a generic and a brand-name drug to manage 

high cholesterol and blood pressure related to a mild heart condition that began after I 

joined Anthem. Those drug costs were subject to a separate $500 brand-name deductible. 

In its notice to me last month, Anthem offered to switch me to a plan with a lower 

increase in premiums but one which does not include brand-name drug coverage. That is 

unacceptable to me since I need that coverage to treat my condition. There are other 

Anthem plans, some of which require underwriting - in which case my preexisting 

condition would not be covered - and some of which don't require it but do carry high 

deductibles, lower lifetime maximums, and very poor prescription drug coverage, in 

some cases with a separate $2000 brand-name deductible. If Anthem goes ahead with its 

desired rate increase, I will almost certainly be driven to a high-deductible policy and will 

have to hope that I don't get sick or injured. "Hope" is not an adequate health care 

policy. I am generally a healthy person who eats right, exercises and takes care of 

himself, and I resent being squeezed in this way. 

Anthem tries to justify these seemingly arbitrary rate hikes by citing rising 

medical costs. This is disingenuous. If insurance companies believe that medical costs are 

out of control, they should fight them rather than simply passing them off to ordinary 
26 


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Americans. Anthem's recent multibillion-dollar profits are repellent because they're at 

the expense of breaking the backs ofpeopJe like me. 

I don't have a problem with corporate profit-making; it's the foundation of 

American business and innovation, and it drives our economy. But I do have a problem 

with profiteering, especially when it's at a level that penetrates so far into the economic 

and social well-being of our country that Americans are discouraged from pursuing 

dreams and starting businesses, and are stuck in undesired jobs simply because they 

worry about losing their health insurance or being able to afford it for their employees. 

This is wrong. In fact, it's insane. And it must be fixed. 

It would be simplistic to think that Anthem's corporate greed is the only problem 

here, though it is a huge one that I believe requires stringent regulation. Sharing the 

blame are indeed hospitals and doctors raising rates far above what is defensible and 

who, like the insurance companies, happily line their own pockets while blaming the 

other side; a legislature that is too beholden to special interests or consumed with partisan 

rhetoric on both sides of the aisle to take necessary action; and bloated bureaucracy all 

around. If all parties -legislators, insurance companies, medical providers - have any 

shred offaimess and decency, they will do whatever it takes to support and pass 

meaningful health refonn now. 
27 

Mr. STUPAK. Thank you, Mr. Arnold. Ms. Henriksen, your opening statement, please. 

TESTIMONY OF JULIE HENRIKSEN 

Ms. HENRIKSEN. Good morning, Chairman Stupak, Chairman 

Waxman and members of the committee. I first would like to say 

that I am honored and more so extremely encouraged with the invitation to come before the subcommittee to present my real life situation regarding the most recent premium increase of my Anthem 

Blue Cross individual health insurance policy. The new found urgency and the spirit of determination with which these hearings 

are taking place give me a tremendous amount of hope that the 

issue of health care reform is going to remain an enormous focus 

of attention until a solution is found satisfactory to all. A little 

about myself and my particular case. I am 54 years old. I have two 

teenage sons, Keaton, who just turned 18 years old and is heading 

to college next year, and Britton, who is 16 years old and a junior 

in high school. I am self-employed as a consultant in the field of 

architecture and interior design, specializing in hotel design. 

I have worked continuously in this field for approximately 27 

years now. I make fairly good money, and both my boys attend private school. I have held a Blue Cross individual family policy since 

owning my own small business. My current policy is called a PPO 

share plan designated with a $1,500 deductible. My monthly premium is $1,042 covering the three of us. Dated January 26, I received a letter with a booklet attached stating that on March 1 of 

this year, my monthly premium would be raised to $1,352 for the 

same policy. This is an increase of $310 per month or a 29.8 percent increase. 

Just to clarify, my current policy states that I must meet an an- nual $1,500 deductible for each two members of my family which 

totals 3,000, and an annual out-of-pocket expense of 4,500 for two 

members of my family, which totals 9,000 in addition to the yearly 

premium of $12,504 that I pay already. I have to tell you that we 

have never even met the deductible each year. All three of us are 

very, very lucky to be very healthy. But what is most concerning 

to me is that I am held captive in this policy since my younger son, 

Britton, was born with a heart condition. Not discovered until age 

3, he was born with a small hole in his heart about the size of a 

dime between his right and left atrium. 

In addition, he has a condition called a cleft mitral valve, which 

means that the flap that opens and closes to allow blood to flow 

from the atrium to the rest of the body does not shut properly. 

Rather it swings back into the atrium and in so doing allows a 

small amount of blood to flow back into the heart with each beat. 

He had surgery when he was 3–1/2 years old, which repaired the 

hole in his heart. At the same time the mitral valve was corrected 

to the extent that it is characterized as a mild leak. The flap of the 

valve needs to move back and forth so it can only be cinched so far 

to correct a leak. He is seen by a pediatric cardiologist once a year 

for an ultrasound and an echocardiogram just to make sure that 

the leak has not changed from mild to moderate or severe. He is 

extremely healthy and is in no way hindered with any symptoms 

or restrictions when it comes to sports exercise. In fact, he is on 


jbell on DSK7SPTVN1PROD with 
28 

his school’s tennis team and has played sports of all kinds all his 

life. 

The reason that I am held captive, so to speak, is because he has 

in insurance terms a pre-existing condition. Sadly, I am allowed 

the so-called privilege of staying with Anthem Blue Cross and paying exorbitantly unreasonable premium hikes each year until I 

can’t pay them anymore. In the same written notice by Anthem, I 

was offered a downgrade to my policy to an annual $2,500 deductible for each member with a 5,000 annual out-of-pocket amount for 

each member at a cost of 1,089 per month, an additional increase 

of $47 to my current 1,042. I am allowed to downgrade until the 

term change in policy takes place and then involves the active underwriting, which I do not want to happen. 

I should note here that if I were to accept this new monthly pre- mium of $1,352, thereby retaining my same current policy, this 

amount would be shy just $92 of my monthly home mortgage payment, which I refinanced this past summer. What worries me most 

is what will it be like for my son when he is 22 years of age, and 

I am no longer able to claim him as a dependent on my taxes. Will 

he be excluded from any kind of policy because of his unforeseen 

heart condition when he was born? 

I must tell you that I have never written to any government officials or office before this, and though my letter, just another 

amongst many in the storm of shock and outcry about Anthem’s 

premium increases, but I felt so compelled to do so for the very reason stated above, and the fact that in this economically depressed 

environment, I find the act of Anthem Blue Cross raising premium 

costs to individual policy holders for such high amounts truly unconscionable. Not to make light of the situation, but if I were to 

send out a letter today in my industry stating that I was raising 

my hourly consultant rate by almost 30 percent, I would not be 

working. 

To conclude, I find that even with all the disagreements in Congress regarding the latest health care reform proposals amazingly, 

I really still do have a positive outlook that our government officials can come up with a workable solution to the obvious and urgent need to change the direction of the health care in this country. 

I thank you for the opportunity to be heard. 

[The prepared statement of Ms. Henriksen follows:] 


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Testimony of Julie Heuriksen 

Before the House Committee on Energy and Commerce 

Subcommittee on Oversight and Investigations 

"Premium Increases by Anthem Blue Cross in the Individual 

Health Insurance Market" 

February 24, 2010 

Good Morning Chainnan Waxman, Chairman Stupak and members of the Committee. 

I am honored and more so, extremely encouraged with the invitation to come before this subcommittee to 

present my real life situation regarding the most recent premium rate increase of my Anthem Blue Cross 

individual health insurance policy. The newfound urgency and the spirit of detennination with which 

these bearings are taking place give me a tremendous amount of hope that the issue of health care refonn 

is going to remain an enonnous focus of attention until a solution is found satisfactory to all. 

A little about myself and my particular case ....... .1 am 54 years old. I have two teenage sons. Keaton 

who just turned 18 years old and is heading to college next year and Britton who is 16 years old, a junior 

in high school. I am self-employed as a consultant in the field of architecture and interior design 

specializing in Hotel design. I have worked continuously in tbis field for approximately 27 years now. 

make fairly good money and both my boys attend private school. I have held a Blue cross individual 

family policy since owning my own small business. 

My current policy is called a PPO share plan designated with a $1500 dollar deductible. My monthly 

premium is $ 1,042 covering the three of us. Dated January 26th , I received a letter with a booklet 

attached stating that on March 1

st of this year my monthly premium would be raised to $1,352 for the 

same policy. This is an increase of $310.00 per month ... or a 29.8% increase. Just to clarifY, my current 

policy states that I must meet an annual $1500 deductible for each two members of my family, which 

totals to $3,000 and an annual out of pocket expense of $4,500.00 for each two members of my family 

which totals to $9,000 in addition to the yearly premium of$12,504.00. I have to tell you that we never 

even meet the deductible each year. All three of us are lucky to be very healthy. 

But what is most concerning to me is that I am held somewhat captive in this policy since my younger 

son, Britton was born with a heart condition. Not discovered until age 3, he was born with a small hole in 

his heart, about the size of a dime, between his right and left atrium. In addition, he has a condition called 

a "cleft mitral valve" wh ich means that the flap that opens and closes to allow blood to flow from atrium 

to the rest of the body does not shut properly, rather it swings back into the atrium and in so doing allows 

a small amount of blood to flow back into the heart with each beat. he had surgery when he was 3-1/2 

years old which repaired the hole in his heart. At the same time, the mitral valve was corrected to the 

extent that it is categorized as a mild leak. The flap of the valve needs to move back and forth so it can 

only be cinched so far to correct the leak. He is seen by a pediatric cardiologist once a year for an 

ultrasound and echocardiogramjust to make sure that the leak has not changed from mild to moderate or 

severe. He is extremely healthy and is in no way hindered with any symptoms or restrictions when it 

comes to sports, exercise, etc. In fact, he is on his school's tennis team and has played sports of all kinds 

all his life. 

The reason that I am held captive, so to speak, is because he has, in insurance terms, a "pre-existing 

condition." Sadly, I am allowed the so-called "privilege of staying with Anthem Blue Cross and paying 

exorbitantly unreasonable premium rate hikes each year until I can't pay them anymore! 

In the same written notice by Anthem, I was offered a downgrade to my policy to an annual $2500 

deductible for each member with a $5,000 annual out of pocket amount for each member at a cost of $ 

1,089.00 per month, an increase of$47.00 to my current $1,042 premium amount. I am allowed to 
30 


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downgrade until the term Change in Policy takes place and then involves the act of underwriting which I 

do not want to happen. 

I should note here that if! were to accept this new monthly premium ot"$1,352.00 thereby retaining my 

same current policy, this amount would be shy just $92.00 of my monthly home mortgage payment. 

(which I refinanced this past summer). 

What worries me most is ..... .'·What will it be like for my son when he is 22 years of age and I am no 

longer able to claim him as a dependent on my taxesT' "Will he be excluded from any kind of policy 

because of this unforeseen heart condition when he was born?" 

I must tell you that I have never written to any government officials or office before this, and I though my 

letter just another amongst many in the storm of shock and outcry about Anthem's premium increases. 

But, I felt so compelled to do so for the very reasons staled above and the fact. that in this economically 

depressed environment, I find the act of Anthem Blue Cross raising premium costs to individual policy 

holders by such high amounts truly unconscionable. Not to make light of the situation but if! were to 

send out a letter today, in my industry, stating that I was raising my hourly consultant rate by almost 30% 

I would not be working! 

To conclude I find that even with all the disagreements in congress regarding the latest health care reform 

proposals, amazingly, I really still do have a positive outlook that our government officials can come up 

with a workable solution to the obvious and urgent need to change the direction of health care in this 

country. 

I thank you for this opportunity to be heard. 
31 

Mr. STUPAK. Thank you. Ms. Meister. 

TESTIMONY OF LAUREN MEISTER 

Ms. MEISTER. Good morning. Lauren Meister, West Hollywood. 

Thank you for inviting me to speak today. I have been an individual plan member of Blue Cross of California, now Anthem, for 

over 17 years. I have always dealt with the company directly, not 

through an agent. Like many people, in 2008 my income dropped 

substantially. I was paying a $500 monthly premium for Anthem’s 

PPO 500 plan. I called Anthem in December of ’08 to see what 

other less expensive plans were available. I expected the plan 

would have a higher deductible or co-pay but would still have the 

basic necessary coverage. 

The Anthem rep was aware of my budget, my medical history 

and age. I was turning 49. She recommended Anthem’s PPO 1500 

plan, which was about $1,000 less per year, so I switched. Just a 

few months later, I received a notice from James Oatman, VP and 

General Manager of Anthem Blue Cross Individual that rates for 

the PPO 1500 plan were being increased on March of ’09, and that 

the new monthly premium would be 528, even higher than what 

I had been paying for the PPO 500 plan but with less coverage. I 

paid the new premium until I spoke with friends about their plans. 

In October, I called Anthem again and asked them how the PPO 

40 plan with Brand RX coverage differed from the PPO 1500 plan, 

which they had recommended to me in ’08. 

I was told by this Anthem rep that the PPO 40 plan had a lower 

monthly premium, no deductible and higher co-pay, but the main 

difference was it did not cover maternity, which at 49 I probably 

didn’t need anyway, so I switched plans again. At 49, I had been 

paying for maternity coverage, a costly, unnecessary benefit. I 

thought Anthem execs should know, so I wrote a letter to James 

Oatman, and I copied Ms. Angela Brawley, Ben Singer, Director of 

PR for Anthem Blue Cross of California, as well as Senator Boxer 

and Congressman Waxman. The only response I received was from 

Congressman Waxman. In January, 2010, James Oatman finally 

did send me a letter but this was to inform me that my rates were 

being raised once again from 373 to 516 per month, an increase of 

38 percent. 

The letter noted that I would also have the option to change to 

PPO 40 plan with generic RX coverage only. This alternate plan 

would increase my premium by only 16 percent as if the 16 percent 

increase was a great savings. I have allergy asthma and I take 

brand prescriptions Accolate, Aerobid and Symbicort. Symbicort is 

fairly new. Accolate will not be generic until probably 2011. Hopefully, I can hold my breath until then literally. For the record, with 

the proper medication my breathing capacity is nearly 100 percent, 

but without the proper medication, I may end up needing more 

health care services, which ultimately will increase medical costs 

for both me and my provider. 

Pre-existing conditions such as asthma limit one’s chances of 

being able to switch to a different health care provider, particularly 

if the goal is to lower the cost of the premium and still maintain 

coverage. This is only one of many reasons why we need health 

care reform. I read that Anthem’s explanation for increasing rates 


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32 

by up to 39 percent was rising medical costs. In one respect, Anthem is right. It shouldn’t cost $20 for a hospital to administer an 

aspirin, but then Anthem’s executive salaries and stockholders do 

not appear to be suffering, and how much money goes to lobbyists 

trying to prevent health care reform, the same reform that Anthem 

indicates is necessary to keep health care costs from rising. 

My issue with Anthem is shared by many and is just a symptom 

of a broken system. We have a system where prevention and 

wellness are not encouraged nor embraced. For example, because 

I was turning 50, my doctor prescribed a bone density test for baseline measurement. Anthem Blue Cross did not cover one nickel of 

the test even though that test could determine if I had a propensity 

for osteoporosis. Penny wise, pound foolish. It is obvious. The 

health care industry needs to be regulated. We saw what the regulation did to the cost of utilities in California. We saw what the 

lack of regulation has done on a global level to our financial and 

banking systems. Well, it is having the same effect on our health 

care system. 

If the City of West Hollywood where I live can regulate how 

much landlords can raise the rent each year to keep rents stabilized, why can’t the federal government regulate how much insurance companies can raise their rates per year in order to stabilize 

premiums. I believe that we should all be able to buy health care 

coverage. If someone can afford to pay for private insurance, great, 

but, if not, there has got to be a public, not-for-profit alternative 

without having to move to Canada, England or France. Some representatives from Congress have stated that we don’t need a public 

option. I say to them I just want what you have, nothing more and 

nothing less. To me, insurance is like marriage. You expect the insurer to be with you in sickness and in health. That is why we buy 

insurance. 

If the insurer can’t live up to this expectation then perhaps they 

need to get out of the business of insuring. I also want to just reply 

that I am an American, and I support Obama’s health plan, and 

I just wanted to make that clear. Thank you. 

[The prepared statement of Ms. Meister follows:] 


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Testimony of Lauren Meister 

Before the House Committee on Energy and Commerce 

Subcommittee on Oversight and Government Reform 

"Premium Increases by Anthem Blue Crossin the Individual 

Health Insurance Market" 

February 24, 2010 

Good morning. Lauren Meister, West Hollywood. Thank you for inviting me to speak today. 

I've been a customer of Blue Cross of California, now Anthem, for over 17 years. I have always 

dealt with the company directly; not through an agent. 

Like many people, in 2008, my income dropped substantially. At the time, I was paying a $500 

monthly premium for Anthem's PPO 500 plan. I called Anthem in December of '08 to see what 

other, less expensive plans were available. I expected the plan would have a higher deductible or 

co-pay but would still have the basic, necessary coverage. 

The Anthem rep was aware of my budget, my medical history and age. At that time, I was almost 

49. She recommended Anthem's PPO 1500 plan, which was about $1,000 less per year than the 

PPO 500 plan, so I switched. 

Just a few months later, I received a notice from James Oatman, VP and General Manager of 

Anthem Blue Cross Individual (Western Region), that rates for the PPO 1500 plan were being 

increased in March of '09 and that the new monthly premium would be $528, even higher than 

what I'd been paying for the PPO 500 plan. 

I paid the new premium until I spoke with friends about what plans they had. In October ('09), I 

called Anthem again, and asked them about the PPO 40 plan with brand Rx coverage, and the 

differences between that plan and the PPO 1500 plan, which they had recommended to me in 

'08. 

I was told by this Anthem rep that the main difference was that the PPO 40 plan had no 

deductible a lower monthly premium ($373), but a higher co-pay (40%), and did not cover 

maternity, which, at 49, I probably didn't need. 

It was then that I realized that all these months, I'd been paying for a costly, unnecessary benefit, 

so I switched plans again and wrote a letter to James Oatman (dated October 21, 2009). 

I copied Ms. Angela Braly, Ben Singer - Director ofPR for Anthem Blue Cross of Cali fomi a, 

Senator Barbara Boxer and Congressman Henry Waxman. The only response I received was 

from Congressman Waxman. 

In January 2010, James Oatman finally sent me a letter, but this was to inform me that my rates 

were being raised once again, from $373 to $516 per month - an increase of38%. 

The letter noted that I'd also have the option to change to a PPO 40 with generic Rx coverage 

only. This alternate plan would increase my premium by only 16%, as if a sixteen percent 

increase was a great savings. 

1 
34 


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Unfortunately, I take brand prescriptions for asthma: Accolate, Aerobid and Symbicort. 

Accolate will not be generic until probably 20 II. Hopefully, I can hold my breath until then --

literally. 

For the record, with the proper medication, my breathing capacity is nearly 100%. But, without 

the proper medication, I may end up needing more health care services, which ultimately, will 

increase medical costs for both me and my provider. 

Some of you may be thinking, why not find another plan with a different health care provider? 

Pre-existing conditions, such as asthma, limit one's chances of being able to switch to a different 

health care provider, particularly if the goal is to lower the cost of the premium and still maintain 

coverage. 

This is only one of many reasons why we need health care reform. 

I read that Anthem's reasoning for increasing rates up to 39% was rising medical costs. In one 

respect, Anthem is right - it shouldn't cost $20 for a hospital to administer an aspirin. But then 

again, Anthem's executive salaries do not appear to be suffering. And how much money goes to 

lobbyists - lobbyists trying to prevent health care refonn - the same reform that Anthem 

indicates is necessary to keep health care costs from rising? 

My issue with Anthem is shared by many, and is just a symptom of an unhealthy, broken system. 

We have a system where prevention and wellness are not encouraged. 

For example, because [was turning 50, my doctor prescribed a bone density test for a baseline 

measurement. Anthem Blue Cross did not cover one nickel of that test even though that test 

could detennine if I have a propensity for osteoporosis. Penny wise, pound foolish. 

It's obvious to me, the health care industry needs to be regulated. 

We saw what deregulation did to the cost of utilities in California. We saw what the lack of 

regulation has done on a national level to our financial and banking system -- well. it's doing the 

same thing to our health care system. 

The City of West Hollywood, where I live, regulates how much landlords can raise the rent each 

year to keep rents stabilized. 

Why can't the federal government regulate how much health insurance companies can raise their 

rates per year, in order to stabilize premiums? 

I believe that we all deserve affordablc, competitively-priced coverage. If someone can afford to 

pay for private insurance, wonderful but ifnot, there has got to be a public option alternative, 

without having to move to England, France or Canada. 

Some representatives from the Senate and House have stated that we don't need a public option. 

I say to them, 1 just want what you have -- nothing more, nothing less. 

2 
35 


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To me, insurance is like marriage; you expect the insurer to be with you in sickness and in health 

- that's why we buy insurance. lfthe insurer can't live up to this expectation, then perhaps they 

need to get out of the business of insuring. 

(I see that Ms. Braly is here today. I'd love to know why no one from Anthem Blue Cross felt it 

necessary to answer my letter; and perhaps she'd like to respond now.) 

3 
36 

Mr. STUPAK. Thank you, and thank you all for your testimony 

and for coming here today. We are going to start with questions. 

We will start with the chairman of the full committee, Mr. Waxman, for questions, please. 

Mr. WAXMAN. Thank you very much. I appreciate the testimony 

each of you has given. Ms. Meister, you indicated you are a constituent. I don’t know if the other two witnesses are also constituents because you are from LA . I do know that WellPoint is a constituent of mine as well. And I want to do what is right for all my 

constituents, but it is not right to have insurance companies deal 

with ever increasing costs by shifting those costs onto the beneficiaries, their customers, because that is what they are doing. If 

you have a brand name drug, they won’t cover it. You have to pay 

for it if you want it. If you want insurance, they figure out a way 

to increase your rates to keep the policy you already have. This is 

the problem with individual insurance. 

What we have as federal employees is we can choose between a 

number of different plans and they can’t turn us down and they 

can’t charge us more if we have pre-existing medical conditions. We 

get coverage because the costs are spread among all the insured. 

That is true of federal employees, members of Congress, for a lot 

of people that work for large employers that provide coverage, but 

the 3 of you are not in that situation. You have your own business. 

You have part-time jobs. You have your own activities, so you have 

to go in the individual market. Those are the people for the most 

part who don’t have insurance coverage because they can’t afford 

it, and it looks like you may not have insurance coverage yourselves if you don’t pay these increased rates or they give you another alternative. 

WellPoint lets you go into another plan that costs more and covers less. What a deal. It doesn’t hold down the cost of care. It simply makes you have to pay more of it, but that is not what you 

want from insurance. You want insurance to cover at least their 

share of the cost, and you would also like them to negotiate better 

prices to hold down health care costs overall. I don’t see any evidence of holding down costs except shifting them on to you. Let us 

look at this situation that you are facing. 

Ms. Meister, you talked about your current plan. You have a 

PPO. You have to pay a percentage of your medical costs and you 

use a brand name drug as well as generic medications after you 

meet your deductible. Is that a correct statement of the plan you 

have generally? 

Ms. MEISTER. Yes, and the brand drugs only come—they don’t 

come in generic. 

Mr. WAXMAN. So you can’t get a generic for those where you need 

the brand name drugs. You told us in your opening statement you 

take your medication to treat chronic asthma. These are not in generic form, so if you go along with what you are being told by Anthem, you would have to switch to a plan with inferior coverage or 

attempt to pay the higher monthly premium. That is the way they 

have got you in the squeeze, isn’t it? 

Ms. MEISTER. That is correct. 

Mr. WAXMAN. Have you decided what you are going to do? 


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Ms. MEISTER. I have decided that I am going to take the lower 

coverage with the generic brand and I will pay out of pocket for the 

brand medication. 

Mr. WAXMAN. And, Mr. Arnold, you have the same health insurance plan as Ms. Meister, and they propose to increase your cost 

by 38 percent as well, or you can switch to a plan that covers generic medications only, is that right? 

Mr. ARNOLD. That is correct, or I could switch to a plan that also 

covers brand name but one that has a much higher deductible over 

all. 

Mr. WAXMAN. And faced with this kind of a problem, you have 

got a terrible choice to make. Have you decided what choice you are 

going to make? 

Mr. ARNOLD. At the moment, I am in a wait and see attitude because I know that these proposed increases have been put on hold 

until May 1, but if nothing changes I will probably switch to one 

of the very high deductible policies. 

Mr. WAXMAN. And they would be very happy because they is 

what they would like you to do. Then you would just have to pay 

more of your costs. Mr. Chairman, these witnesses made clear that 

the alternative plans Anthem is offering to its policy holders provide dramatically less coverage for marginally less money, and if 

the only option available to consumers in the individual market is 

to pay outrageous monthly premiums or switch to a plan that 

doesn’t meet their needs, then it is another example of why we 

need reforms in the individual market. All of us here will say we 

care about this. We want to have insurance reforms. That is what 

we are told. 

But you can’t reform the insurance system without providing 

some standard policy so you can compare policies. You have such 

arbitrariness in the kinds of policies that you have available to you, 

and you can’t really figure out what your needs are because from 

year to year it changes and it goes up. What we need is for insurance companies to have to provide insurance for everybody and 

spread those costs, and to do that we have to make sure that everybody is covered, and to make sure that everybody is covered we 

have to help people who can’t afford their coverage, and we have 

to tell the insurance companies they can’t deny you that coverage. 

That is where we find our differences as we try to deal with 

health reform. We have got to deal with the problem in a broader 

way than say, oh, let us do away with pre-existing conditions 

where the Republican proposal doesn’t even do that. They would 

put people with pre-existing conditions in a special group where 

they would pay higher premiums and they would be treated differently. We have got to standardize insurance and make sure that 

people have access to it. That is what President Obama has been 

trying to do. 

We are going to go to a summit tomorrow that the President has 

called for the Democrats and Republicans. I hope we can work on 

this in a bipartisan basis. This shouldn’t be a Democratic or Republican issue, but we will see tomorrow whether we can look for common ground rather than hear the accusations back and forth that 

we want to socialize medicine or we are going to create death panels or we are cutting back on people and the elderly, and then yet 


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we find lack of cooperation to find a solution to this intractable 

problem. I hope we don’t let another opportunity go by and wait 

another 15 years before we tackle the problem again. You can’t afford it, and the American people can’t afford it either. Thank you, 

Mr. Chairman. 

Mr. STUPAK. Mr. Burgess for questions, please, 5 minutes. 

Mr. BURGESS. Thank you, Mr. Chairman. In the interest of bipartisanship and comity, I feel that I need to respond to some of the 

lectures that we have been getting this morning. Mr. Chairman, 

and referring to Mr. Waxman as the chairman of the full committee, I would be offended as chairman of the committee if the 

committee passes a bill and the Senate passes this bill I didn’t like, 

but fair enough, the Senate passes a bill, a bill I didn’t like that 

was starkly different from this committee’s bill, but nevertheless 

they did what they intended to do, and then the proper process is 

for the two sides to get together, House and Senate, I am talking 

about, not Republicans and Democrats, but the House and Senate 

to get together and reconcile the differences in what is called a conference report, and this is part of our normal procedure. 

But now we have a situation where the White House functioned 

as the conference with no input that I am aware of from yourself 

or Mr. Stupak or Mr. Rangel or Mr. Miller as chairman of the Education and Work Force Committee, the White House put together 

this conference report and now we will be required at some point 

to vote on that and deal with it through a process called reconciliation which is a little arcane, but it means you don’t have to have 

quite so many supporters to get this done. And if the American 

people were behind what we were doing, it wouldn’t be this difficult. 

Now you can look at polls however you want, but 60 percent of 

the American people don’t like what we are doing. Twenty percent 

of the people are in favor of Congress generally and 45 percent of 

the people are in favor of the President, so with these sorts of numbers it is difficult to do something this massive in the form of restructuring. Now just another issue that you made. You brought up 

the federal employee health benefits plan. It is employer-sponsored 

insurance so it doesn’t exactly translate to what we are talking 

about here today, but had we worked more on making the individual market look more like the ARISA protected market under 

employer-sponsored insurance the multi-state corporations that 

provide insurance to their employees across the country that aren’t 

holding to things like state lines perhaps we could have delivered 

something that was meaningful for someone in the individual market. 

I have been in the individual market. I know that it is sometimes 

tough to find the plan you want. I have had adult children in the 

individual market. I have had to keep up with things that they 

chose not to but I thought was important. We do have regulation 

in the individual market. It occurs at the state level right now. It 

may be a bad thing. Maybe it needs to be a the national level, but, 

you know, when I just looked through the federal employee health 

benefits plan book, I get a better deal because my residence is in 

Texas than I would in California, and certainly a better deal than 

I would get in New Jersey, so maybe I don’t want a national reguVerDate Mar 15 2010 06:19 Nov 09, 2012 Jkt 076009 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 E:\HR\OC\A009.XXX A009

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lator who is going to base everything on an area that is really not 

germane to where I live, so we do have to be sensitive to the fact 

that the states are different. 

Now we passed a bill twice in the 108th and 109th Congress that 

would have allowed aggregations of small businesses across state 

lines, so-called association health plans. The reason there is not 

pre-existing conditions in the federal employee health benefits plan 

is not because we set up something that is better for ourselves. It 

is because the pool is so big, there are so many federal employees, 

which may be a good thing or a bad thing, we could argue about 

that, but there are so many federal employees that the pool is so 

large that pre-existing conditions actually don’t enter into the 

equation. What we could do for writers across the country, for example, or architects across the country, let every architect buy into 

an association plan where all the other architects buy into it, realtors, whatever kind of association you want to make, and suddenly 

you have got a pool that has the market share of a company like 

Verizon that has employees in all states in the union and buys insurance for them. 

Mr. Arnold, I think you brought up about the affordability of the 

premium, and I don’t know your income and I am not going to ask 

you, but have you looked at the House-passed bill and calculated 

what your premium would be? 

Mr. ARNOLD. No. 

Mr. BURGESS. The House-passed bill, and I am not lecturing you 

here, I want to make you aware, the House-passed bill is a good 

deal for someone who is unemployed and has no insurance. It provides access that has never existed in the past. Your premium 

under the House-passed bill, and again I don’t know how much you 

make and I am not going to ask you to tell us, but for someone who 

makes at 350 percent of the federal poverty level the annual premium, the annual premium would be right at $4,200 a year, so a 

little bit more than what you are paying right now. 

Now 350 percent of the federal poverty level is a good salary. I 

don’t know how it works out with California cost of living. But it 

is just a little under $38,000 a year for a single individual. I don’t 

know whether you are married or not, and again I am not going 

to ask you. But just to point out that, yes, you have brought up a 

significant point that we need to pay attention to, that your premium has increased significantly under Anthem, and we are going 

to ask Anthem to justify what they have done in the California 

market. 

But I do want you to understand that with the House-passed bill 

that not everyone in your situation, depending upon income, someone who earns 400 percent of the federal poverty level, which is 

$43,000 a year, would be paying $5,400 in annual premium as a 

single individual in the government option, in the House-passed 

plan. Only 2 rating bands for younger and older, no tobacco rating, 

so there are some things in the House-passed bill that might not 

improve affordability in your situation, and that is really what we 

are talking about here because Anthem has affected the affordability of your policy. I would give anything to know, Ms. Meister, 

what you are going to be charged for your bone density. I won’t ask 

you, but I will also suggest that I think your doctor was right to 


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recommend it. And if your doctor recommended it when you were 

65 years of age, yes, it would be covered under Medicare but your 

doctor would only be paid $40 for the privilege of providing you 

that service. 

Again, I don’t know what your doctor was proposing to charge you. I suspect it was more than $40 but I don’t know that. After 

you turn 65 under the big public option that we now call Medicare 

if your doctor charged you more than $40 for that procedure, my 

cost is $200—— 

Mr. STUPAK. The gentleman’s time has expired. 

Mr. BURGESS [continuing]. Your doctor would be violating the 

law to charge you the additional. So we will give up some things 

if we go with the House-based bill. That is why it is so important 

for us to get it right. That is why it is so important for us to go 

through regular order and not let the White House subsume the 

duties of the conference committee—— 

Mr. STUPAK. The gentleman’s time has expired. 

Mr. BURGESS [continuing]. Which is, unfortunately what has 

happened now. I told you you would regret having me here. 

Mr. STUPAK. No, Mike. I have sat in this chair a long time and 

I have listened to you forever, and I know you always go over. I 

know I have to be diligent. I know I have to keep on you. I feel 

sorry for these witnesses because they are self-employed. They took 

time off of their jobs probably at a loss of money to come and give 

us the courtesy of asking them questions, and you never asked 

them a question. So I feel sorry for our witnesses. 

Mr. BURGESS. I supplied them with valuable information they 

couldn’t have gotten any other place. 

Mr. STUPAK. Yes. Well, it is amazing. It is my turn for questions. 

Let me just say a couple things. This committee, this subcommittee 

in the last 3 years have held hearings on under insured, on rescissions, on purging of small businesses. And I asked for this hearing. 

As I said in my opening, Michigan proposed a 56 percent rate increase. And I would have liked to have had this hearing in LA. We 

have had hearings in Indiana. I will go anywhere in the country 

to hold hearings on health care because I think that consumers in 

this country are being bankrupt by health insurance, and I want 

to see health insurance passed. And the reason for this hearing— 

and it is a coincidence. When we set this hearing, when we were 

doing things, we didn’t know the White House was going to do a 

summit on health insurance. But I will go anywhere with this subcommittee. I will go to any district and hold these hearings because 

I think they are valuable. 

And when Michigan proposed a 56 percent increase for our people, I have the e-mails that they finally settled at 30 to 39 percent 

increase for these small business people, much like the panel we 

have here today, and people just can’t afford it. We are all truly 

one injury or one illness away from bankruptcy. But let me ask 

this question. Yesterday we did a hearing on Toyota, and 10 years 

ago if I would have bought a car and I buy one now today, I get 

all kinds of extra bells and whistles whether it is a Toyota, a General Motors, whatever it might be. Mr. Arnold, Ms. Henriksen, Ms. 

Meister, has your insurance given you more bells and whistles as 

you have seen these increases? 


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Mr. Arnold, yours went up 74 percent in the last 2 years. Ms. 

Henriksen, I see premiums increased about by the time you do 

your premium, your deductible, and your out-of-pocket, that is 

about $31,000 before you even start tapping into anything. And, 

Ms. Meister, you are just trying to keep your drugs that will keep 

you breathing. Have you seen increases in benefits as these prices 

have gone up? 

Ms. MEISTER. No, less benefits. 

Mr. STUPAK. Mr. Arnold. 

Mr. ARNOLD. Yes, also less for me. Last year, in fact, when my 

rates were raised 26 percent, Anthem also increased my prescription drug co-pay for both brand name and generic. 

Mr. STUPAK. Ms. Henriksen. 

Ms. HENRIKSEN. No, I haven’t, and sometimes when I open my 

statement from them after going to doctor, I am shocked that like, 

oh, wow, they didn’t cover that. You know, it is things like that, 

but I haven’t calculated exactly any changes. 

Mr. STUPAK. You mentioned your son that had the heart issue 

there, the hole in the heart. How long will they continue to hold 

like a pre-existing condition like you mentioned he is going to turn 

22—— 

Ms. HENRIKSEN. Probably the rest of his life. 

Mr. STUPAK. OK. 

Ms. HENRIKSEN. He will always have a heart condition. 

Mr. STUPAK. Which requires him to see a cardiologist. He doesn’t 

have any problems. He’s playing sports. 

Ms. HENRIKSEN. He is completely fine. I mean, you know, you 

can only cinch it so far, and it can’t be completely corrected so he 

will always have a condition in his heart, but he can only stay on 

my insurance till I claim him as a dependent. 

Mr. STUPAK. Well, the other thing in looking at this file and 

WellPoint and Anthem here in California, and we are looking at 

one of the e-mails that the vice president for individual pricing 

states, it says Jim has asked Brian to price five or six downgrade 

options to be made available in conjunction with the upcoming rate 

action, meaning this increase they are passing on. In another email the company’s regional vice president and actuarial, Brian 

Curley, proposes that WellPoint create five or six California lookalike plans, look-alike plans for California, with a benefit or two removed to create a downgrade option upon renewal. My question, 

and I guess I will direct it to Ms. Meister, how does it make you 

feel to know that part of Anthem’s business plan is to reduce or restrict your health care coverage being offered to you on downgrade 

options to switch it during your annual renewal. How are you going 

to be able to afford your medication? 

Ms. MEISTER. This is what has been happening the last few 

years. I have had to downgrade because the price has gotten too 

high so I will have to pay for my medications through my savings 

through—— 

Mr. STUPAK. What do you think that cost is going to be for your 

brand name drug if you are going to go to the generic, so what will 

that out-of-pocket cost be, do you know, of this drug? 

Ms. MEISTER. Yes. Accolate is $100 and I have to buy that every 

month, so that—— 


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Mr. STUPAK. $100 for a 30-day supply. OK. 

Ms. MEISTER. That is just for the Accolate, yes. 

Mr. STUPAK. Ms. Henriksen, Anthem, I believe you said, offered 

to switch you to a similar plan to the one you have now which 

would come with higher deductibles. What is your opinion on the 

scale backs? 

Ms. HENRIKSEN. Pardon me? 

Mr. STUPAK. What is your opinion on, well, OK, I can get a different plan. I am going to get less coverage but I am going to have 

to pay more. 

Ms. HENRIKSEN. I figure I don’t have a choice. I can’t afford the 

premium that they are stating for the existing policy they have 

now so I have a call in to my agent and, you know, he is going to 

go over options for me, but I know from talking to him almost a 

year ago that because of my son’s heart condition I can only downgrade so far until he has to be underwritten, and I don’t want to 

do that. So, you know, I would probably go with the downgrade of 

the $2,500 deductible and 5,000 out-of-pocket because it is $47 

more than my existing payment but it is not $310 more. 

Mr. STUPAK. What is the breaking point when you can no longer 

afford it at all? 

Ms. HENRIKSEN. Oh, I think it is insane as it is now. 

Mr. STUPAK. You said it was almost as high as your mortgage, 

right? 

Ms. HENRIKSEN. Yes. It is $92 less than my mortgage payment. 

Mr. STUPAK. Mr. Arnold, let me just finish up with you, if I may. 

I know you have had a 74 percent increase in your premium rates 

according to your testimony. Obviously, your insurance hasn’t gotten better. Do you believe Anthem is trying to push customers off 

the plans with less comprehensive coverage and in the plans that 

barely meets their needs so they just drop coverage all together? 

Mr. ARNOLD. Yes. I mean I think the reason that the plans are 

going up are because healthy people are dropping it all together because they are like me. They are getting priced out of it. I mean 

I am generally a healthy person. I have an existing condition, but 

it is getting so high that I mean if it went up to $800 a month I 

would have to drop it. That I couldn’t afford. No way. But that is 

an extreme. Just to prove a point. I mean 319 a month which they 

want to raise it to is very, very difficult for me. The 231 that I have 

had for the last year, I have not been happy with but, you know, 

I have managed to do it even though last year was a pretty tough 

year in this economy and my income was lower last year than it 

was the year before. So, yes, they are trying to push people like me 

out. 

Mr. STUPAK. Thank you. My time has expired. Thank you all for 

being here. Mr. Gingrey, questions, please. 

Mr. GINGREY. Mr. Chairman, thank you. And I will be fairly 

brief. I wanted to direct my first question to Ms. Meister. Ms. Meister, you mentioned in your testimony kind of in your closing that 

you want just what members of Congress, members of the House 

and the Senate have, nothing more, nothing less, and I want to just 

say to you and to the other witnesses that I agree with you. I agree 

with you. I think that the American people in every state should 

have that opportunity and when the health care reform bill was 


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first marked up in this committee, H.R. 3200, we spent hours and 

several days, in fact, several weeks marking up that bill and 

amending it and making some suggestions for amendments on both 

sides of the aisle. In fact, two amendments that I had in particular 

that I think you will like, and I would like to ask your opinion on 

it, was that all Americans have what we have, members of Congress, and that amendment unfortunately went down pretty much 

straight party line, and I followed up with that and said, well, you 

know, if there is a public option, and I think you in your testimony 

talk about a public option, as you know, right now there is no public option in any of the bills, but in this committee there was. H.R. 

3200, there was a robust public option, as I am sure you know. 

And so my amendment was, OK, if the public option is so good, 

maybe it is, then let’s show good faith in it and have every member 

of Congress, House, Senate, and indeed the President and the Administration and their families sign up for the public option, and 

that also failed on straight party line vote. I would like to know 

your opinion and maybe the other members of the panel, what they 

think of that, those two recommendations. 

Ms. MEISTER. I am very willing to pay for insurance. I just want 

to pay for something that is affordable and that actually covers me. 

We have Medicare. I thought the plan that extended Medicare to 

55, down to 55, was a good idea, and have those people between 

55 and 64 pay for the plan, so I don’t know what else to say. I don’t 

want to have to be spending the next 15 years of my life looking 

forward to being 65 so I can get Medicare. 

Mr. GINGREY. Well, yes, and certainly I understand your point 

there but do you realize that, and I am sure you do, that Medicare 

currently has an unfunded liability over the next 50 years of $35 

trillion, and so to add that many more millions of people between 

age 55 and 64 when we can’t even meet the obligations that we 

currently have, you know, that was the problem with that proposal. 

Ms. MEISTER. I see the country supported bail out for the banks 

and for the car companies. I would like to see them bail out the 

American people. 

Mr. GINGREY. And I think you will be pleased to know that I 

voted against that bail out for the car companies, and I thank you 

for bringing that up. Mr. Arnold, let me shift to you just a minute 

in regard to meaningful health reform. You mentioned that. By 

meaningful health reform, would you include in that medical liability reform? 

Mr. ARNOLD. Absolutely, I would. I think that ideas on both sides 

of the aisle, there are good ideas on both sides. Just to address 

what you just said a moment ago about the public option and so 

forth the reason that—well, you explicated the reason. You said it 

was party line vote. It is politics. The party that is not currently 

in power doesn’t want to give the party that currently is in power 

and the President a victory of any sort, so parties and politicians 

and parties—— 

Mr. GINGREY. Well, Mr. Arnold, reclaiming my time because I 

just got a very few seconds left. Absolutely, I think that we ought 

to give the President the opportunity to do it in a bipartisan way 

and that is why when we have this meeting tomorrow at the Blair 

House, the health care summit, I feel sure that the members on the 


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Republican side from the House and the Senate, maybe Dr. Coburn 

or Dr. Brasso representing health care in particular as a profession 

will offer that, and I look forward to the President hopefully adopting it because California, as the three of you well know, enacted 

that legislation back in the late ’70s. I think the acronym was 

MICRA, and it has worked. It has worked. And fortunately the 

California legislature hasn’t ruled any of that unconstitutional so 

I am glad that you support medical liability reform. Mr. Chairman, 

I see my time has expired, and I will yield back. 

Mr. STUPAK. Mr. Arnold, did you want to finish an answer there? 

Mr. ARNOLD. Yes. I would like a brief moment to finish what I 

was saying. I thank Mr. Gingrey for what he said, and I take him 

at his word and I would hope that you would encourage all of your 

parties and colleagues to operate in good faith and not to use 

words, irresponsible words, like socialism and death panels and so 

on and so forth that you hear from parties and politicians and from 

partisan media commentators because they are completely not an 

accurate description of the issues that are at stake. Thank you. 

Mr. STUPAK. Ms. DeGette for questions. 

Ms. DEGETTE. Thank you. Thank you, Mr. Arnold, for clarifying 

your statement. I think what you said is important and I hope everybody listens to it. It seems to me in listening to all three of your 

testimony aside from the fact that you are buying insurance on the 

individual market the other problem that each of you has is either 

yourselves or family member with a pre-existing condition that 

pretty much limits you from trying to shop around and buy cheaper 

insurance, is that correct, Mr. Arnold? 

Mr. ARNOLD. Yes. 

Ms. DEGETTE. Ms. Henriksen, Ms. Meister. And I understand, 

Ms. Henriksen, when you were talking, I told my staff, I said I feel 

like this is me because I am like you, I have two daughters, 20 and 

26, and like you my younger daughter has a pre-existing condition 

which she will have for her whole life. Not only does that limit— 

even though I am in the federal employees insurance system, I am 

still limited in shopping around because of underwriting, but what 

I am the most terrified about with her is when she graduates from 

college and starts trying to buy insurance on her own she is going 

to have an impossible time buying a policy, especially as a young 

person who is just starting out in the labor market that will cover 

her pre-existing condition. I am sure that you have thought about 

that too with your son. 

Ms. HENRIKSEN. That scares me immensely and with businesses 

eliminating all insurance group plans and things like that in my 

industry hardly anybody has it. I don’t see how he is going to be 

able to pay for an individual policy with a pre-existing condition 

when he is working. 

Ms. DEGETTE. Right. So here is my question for all three of you. 

If you could go on some kind of insurance exchange that allowed 

anybody to go in and buy from different insurance companies, and 

the people on that exchange so you could choose between competition between different insurance companies and they couldn’t exclude you or your kids because of a pre-existing condition, do you 

think that would help you with your insurance choices? Mr. Arnold. 

Mr. ARNOLD. It sounds like it might, yes. 


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Ms. DEGETTE. Ms. Henriksen. 

Ms. HENRIKSEN. Yes. I believe that it is free enterprise, I guess, 

and you are allowed the privilege of shopping for almost anything 

else. Why shouldn’t it be insurance too? 

Ms. DEGETTE. Ms. Meister. 

Ms. MEISTER. Yes, because we are being penalized for being individuals and having individual plans. 

Ms. DEGETTE. Right. And, you know, Ms. Meister, I want to ask 

you about something because you said you thought it was as good 

idea if they extended Medicare down to age 55 and with every 

passing year that idea sounds better to me too. But were you aware 

that those proposals didn’t just say we are going to pay for people 

to have Medicare. They would actually have to buy in. 

Ms. MEISTER. Oh, yes, absolutely. 

Ms. DEGETTE. And you would be willing to buy into that Medicare is what you are saying. 

Ms. MEISTER. Absolutely. 

Ms. DEGETTE. I just wanted to clarify that. OK. Now I just want 

to explain one more thing with the 3 of you because I think there 

has been some miscommunication about insurance companies selling insurance across state lines. Were you aware that right now insurance companies can sell insurance across state lines, but if they 

do that they have to comply with the laws of the state where they 

are selling that? Mr. Arnold, were you aware of that? 

Mr. ARNOLD. No, actually I wasn’t. 

Ms. DEGETTE. OK. Ms. Henriksen. 

Ms. HENRIKSEN. No, I wasn’t either. 

Ms. DEGETTE. Ms. Meister. 

Ms. MEISTER. No. 

Ms. DEGETTE. OK. Well, see, what happens right now different 

states like California or Colorado or Iowa or Georgia, any of the 

states, they can sell insurance across state lines, but if they do that 

they have to give people the insurance coverage that those states 

require, so if California says you have to cover maternity benefits 

or you have to cover prostate cancer screening or something else, 

then they have to do that, but what the proposal that some from 

the other side of the aisle have made is to say people could sell insurance across state lines but they would only have to comply with 

the laws of the state where they are incorporated. It would be sort 

of like how all corporations, not all, but a lot of corporations incorporate in Delaware because those state laws are very favorable to 

corporations. 

So they can incorporate in a state which had very low requirements for coverage. And I want to talk to you about that, Ms. 

Henriksen, because you got 2 kids. Would it help you to be able to 

buy a very low cost plan but one that didn’t offer very many coverages for you like mammography or some screenings for your kid? 

Would that help you? 

Ms. HENRIKSEN. I guess I would have to see specifically what 

they were offering. 

Ms. DEGETTE. What it was, yes. 

Ms. HENRIKSEN. But, like I said, we are so lucky, all three of us, 

to be healthy. We never go to the doctor. We have very little cost 

incurred, you know, through insurance so I would be interesting to 


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see what I could eliminate and what I would then need. I could 

pick and choose, I guess. 

Ms. DEGETTE. Yes, you could pick and choose. But you wouldn’t 

want to buy a plan that would barely cover anything if you got 

sick. 

Mr. HENRIKSEN. No. 

Ms. DEGETTE. And, Ms. Meister, would you want to buy a plan 

that wouldn’t cover the specific medications that you needed? 

Ms. MEISTER. I would have to work it out and actually figure out 

the financial side of it and see how much my medications cost me 

per year and how much I am being covered. I mean even now I 

have a deductible for the brand. I believe it is $500. Until that 

kicks in, it is 4 months into the year. 

Ms. DEGETTE. OK. Thank you. 

Mr. STUPAK. Thank you. Mr. Braley for questions. We will wait 

for Mr. Green to get settled there. 

Mr. BRALEY. Thank you, Mr. Chairman. I began my opening remarks by talking about the fact that I am not a Democrat who limits my conversation to health insurance reform because I believe 

that health insurance reform is a key part of comprehensive health 

care reform. And I am so glad the three of you are here today because you helped put a human face on what is wrong with health 

care and health insurance delivery in this country right now. We 

had 17 town hall meetings back in my district last summer and 

what I learned is that people who oppose health care reform, and 

especially the health care reform we have been talking about, really don’t want to talk about the human face of health care, so I want 

to spend a few moments talking to you about that. 

One of the people who came up to me in my last town hall meeting ripped the House health care bill, and then said after the meeting, Congressman, I need your help. I said what can I do? He said 

my brother was just diagnosed with non-Hodgkin’s Lymphoma, and 

he lives in the northern part of your district. The closest place for 

him to get treatment is at the Mayo Clinic in Rochester, Minnesota, but he can’t get treatment there because they are not in his 

insurance plan’s provider network. Another young woman interviewed me during the health care debate who was a class mate of 

my 2 sons, sat down to interview me, and the first thing I noticed 

about her was she had a cleft palate. And during her interview, she 

told me that she was so excited because her parents had almost 

saved up enough money for her last surgery, and I said isn’t that 

covered by your insurance policy? And she said, no, it is defined as 

cosmetic surgery under my plan. 

So a woman, 21 years old, born with a birth defect just like cystic 

fibrosis or cerebral palsy, which are covered under health care policies, has gone 21 years with a birth defect that limits her ability 

to eat, to talk and, most importantly, her self esteem. The last one 

I want to talk about is my nephew’s son, Tucker Wright, who I 

have talked about before in these hearings. Tucker was 18 months 

old when he was diagnosed with liver cancer, had 2/3 of his liver 

removed, has had enormous medical costs, and thank God he is 

still alive, but he will almost certainly reach his lifetime cap under 

his private health policy by the time he is 18. He will almost certainly have another bout of cancer before he turns 18. His parents 


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are doing fundraisers to cover their uninsured medical costs. Both 

of them work full time and have good health insurance, and yet if 

his parents want to change jobs they would not be able to because 

of the exclusion for pre-existing conditions. 

All three of you have lived this in your own lives so I want to 

ask you, Ms. Meister, you have chronic asthmas, you talked about 

that. If you opted to terminate your policy with Anthem and purchase an individual insurance policy to get a more reasonable deductible or premium, you would have to go additional medical underwriting, correct? 

Ms. MEISTER. I would imagine so, yes. 

Mr. BRALEY. Right, because that is the way this works. And 

given your chronic asthma, do you think that that would be a problem for you in getting additional coverage? 

Ms. MEISTER. Personally, I work out every day. I live a very 

healthy life so I don’t—but on paper that is a different story. 

Mr. BRALEY. You have to fill out the same questionnaire. 

Ms. MEISTER. They should talk to me like you are talking to me. 

Mr. BRALEY. Yes. And, Ms. Henriksen, you talked about your 

son’s problem with the condition with the hole in his heart. When 

you fill out any application for underwriting purposes, you are required to go through your family’s health history and that would 

appear. 

Ms. HENRIKSEN. Yes. 

Mr. BRALEY. And does that concern you? 

Ms. HENRIKSEN. Oh, completely. 

Mr. BRALEY. And, Mr. Arnold, you were the one who concluded 

your compelling remarks with a smack down to all of us about 

doing what is right, and you also have been affected by this because these are the types of things that make it frustrating for people to get private insurance because this can be so daunting. Is the 

experience that you have had consistent with what the other witnesses and some of the people we have been talking about face 

every day and try to get health care coverage? 

Mr. ARNOLD. Absolutely so, yes. Yes. I won’t repeat everything 

that they just said, but what Ms. Meister said about being underwritten again and pre-existing condition either not being covered or 

causing the base rate on that policy to be marked up by my insurance agent told me 20 to 100 percent because of that condition. 

These are the kinds of things that can happen. 

Mr. BRALEY. Mr. Chairman, health insurance is supposed to help 

us when we are sick, not punish us for requiring medical care, and 

I think what we have heard today reinforces the need to get health 

reform done now. We as a country cannot afford to wait any longer. 

Passing meaningful health care legislation that eliminates disqualification based on pre-existing conditions is absolutely essential so 

that every American can have access to quality comprehensive 

health insurance, and I yield back. 

Mr. STUPAK. Thank you, Mr. Braley. I should note that Representative Hill is with us. He is a member of our committee. We 

had a hearing on rescissions down in his district earlier this year 

in Indiana. Like I said, we would be happy to go where we need 

to go to do these hearings because I think it is important that we 

put a human face on the cost of health insurance. We have votes 


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coming up. I am going to try to get through this panel if we can. 

Mr. Green, you are up for questions, please. 

Mr. GREEN. I appreciate my colleague from Iowa questions and 

your responses. I want to look at it from a different tact because 

you have trouble with rate regulation or insurance regulation in 

California. In Texas we have never had any regulation. It is literally the free market. And having been involved as a state legislator in trying to deal with fairness for my constituents and purchasing individual policies and having a son who had the same 

problem is his small business trying to find an individual policy. 

He couldn’t find one because in high school he was diagnosed with 

colitis and nobody wanted to write him except for $2,000 a month. 

He has found it through an HMO or PPO in Real Ranch Valley in 

Texas so he can get it at least for his 2 boys now and his wife because he just couldn’t do it. So problems in individual market and 

oversight whether it is in California or Texas or Virginia or anywhere and that is the issue. And that is why the lack of oversight 

or ability to look at what these premium increases that we are getting ready to experience. 

My concern, and this is something that members of Congress 

have to defend when we travel anywhere, and believe me it has 

made us watch where we are traveling. I want to ask some questions. In addition to paying their top executives handsomely between 2007 and 2008, WellPoint spent over $27 million to host 103 

executive retreats off company premises. The Democrat caucus actually had our retreat here at the Capitol. Fifty-five of these retreats, over half the costs were over $100,000. To put that in perspective, the median income in the United States in 2008 was 

$52,000, and so you can see that over half the retreats were over 

100,000 so that was well over the median income. In 2007, 

WellPoint spent 3.7 million to host 782 attendees at a brokers and 

agents event at the Phonecian, a lavish resort and spa in Arizona, 

for 5 days. And if I could put up a picture of that slide. 

Later that year, WellPoint sent 154 attendees to the Four Seasons resort in Manlei Bay, Hawaii for a 4-day broker event that 

cost the company 850,000. That is over 500,000 a person. If we 

could put that slide there. In 2008 during the height of the recession, WellPoint paid over 1.3 million to host 360 attendees at the 

Four Seasons Hotel in San Diego, and if we could put that slide 

up there. Ms. Henriksen, do you think a company that is struggling 

to keep up with the rising health care costs would be able to send 

thousands of employees and agents on lavish retreats such as 

these? 

Ms. HENRIKSEN. No, definitely not. I would like to know what 

they are doing at these retreats. 

Mr. GREEN. Mr. Arnold. 

Mr. ARNOLD. Of course not. 

Mr. GREEN. Ms. Meister. 

Ms. MEISTER. No. 

Mr. GREEN. What is your reaction to the images and figures because I know what my constituents would be if I was at that locations, and since you are ultimately paying the freight or asked to 

pay the freight, does it make you wonder if your hard-earned preVerDate Mar 15 2010 06:19 Nov 09, 2012 Jkt 076009 PO 00000 Frm 00054 Fmt 6633 Sfmt 6633 E:\HR\OC\A009.XXX A009

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miums have indirectly gone to paying for the spa retreats and the 

golf getaways? 

Ms. MEISTER. I was thinking I wish I was an executive at 

WellPoint. 

Mr. GREEN. Mr. Chairman, it seems unconscionable that the 

company with the spending record that would reach deeper into the 

pockets of the policy holders at a time when so many Americans 

are struggling to stay afloat, it also seems to me that any company 

that can afford to send hundreds of their employees to these lavish 

retreats all over the world can afford to maintain reasonable and 

affordable premium rates for its customers, and that is what bothers me. On the individual market, we don’t see that regulation and 

oversight on the state level, and that is why maybe on the national 

level, I know President Obama earlier this week announced that, 

there are parts of his bill that I have problems with or his suggestion, but one of the things I like is if we are going to sell insurance 

across state lines to individuals whether they be in Houston, Texas 

where I represent or San Diego or anywhere else, I would like to 

see that there is some oversight on what they are doing with that 

money to justify those premium increases. Thank you, Mr. Chairman. 

Mr. STUPAK. Thank you, Mr. Green. Continuing with questions, 

Ms. Sutton, questions, please, for this panel. 

Ms. SUTTON. Thank you, Mr. Chairman, and thank you for your 

compelling testimony. I think your stories speak to the stories of 

many Americans across the country, including my constituents. To 

follow up on my colleague, Mr. Green’s questioning, I would just 

like to talk a little bit about the executive at WellPoint. Not only 

do we see the lavish retreats that were pictures that were reflected 

on the screen, we also know that as premium rates increase and 

become more and more inflated and health insurance coverage slips 

further out of reach for people just like you, it is important to ask 

where are the revenues going, not only to retreats but also to executive salaries. 

WellPoint has stated publicly that these most recent premium increases were necessitated by rising medical costs and a shrinking 

risk pool, that it needs these rate increases in order to stay afloat. 

But I understand that companies do need to turn a profit. We all 

understand that. But what I don’t understand is how WellPoint can 

claim that these increases, rate hikes that are literally bankrupting 

its policy holders are necessary to stay in business especially when 

we see what we see when it is spending millions upon millions of 

dollars compensating its top executives. Data received by the committee show that WellPoint paid its executives over $347 million in 

2007 and 2008 alone. 

In 2008, WellPoint paid $115 million to 85 senior executives compensating 39 executives over a million dollars each. That year one 

executive made $9 million and two executives made over $4 million. And I guess I would just like to ask you, our witnesses and 

policy holders, how you feel about a portion of your premium payments bankrolling multi-million dollar salaries in these tough 

times. Ms. Meister, do you believe a company that can afford to pay 

a single executive nearly $10 million in 1 year has the right to deVerDate Mar 15 2010 06:19 Nov 09, 2012 Jkt 076009 PO 00000 Frm 00055 Fmt 6633 Sfmt 6633 E:\HR\OC\A009.XXX A009

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mand higher premiums from you so that it can ‘‘keep up with the 

market?’’ 

Ms. MEISTER. No, I don’t. And I agree with something Ms. 

Henriksen said. She said if I raised my rates like they raise our 

rates, I wouldn’t have clients, and that is the same in my business. 

You know, there is reasonable and then there is just outrageous. 

Ms. SUTTON. Thank you. Ms. Henriksen. 

Ms. HENRIKSEN. Well, not to be funny but it makes me sick to 

think that all of this money is going to executives in this economy 

when so many people are struggling. I do make good money, yet 

my industry is really struggling. There are no new hotels being 

built. There are no, you know, residential. There is no building 

going on so I suffer because of that. 

Ms. SUTTON. And Mr. Arnold. 

Mr. ARNOLD. I, of course, too think it is unconscionable, and I believe the number I read was that in the last quarter WellPoint had 

a profit of over 4 billion. Even if you cut that in half, it is still an 

incredibly healthy profit, so it just speaks to, as I said in my testimony, profiteering versus profit making. There is a difference. And 

profit making is fine. It drives our economy. It is the foundation 

of American business. But profiteering, when it affects people like 

us in the way that it has, is just wrong. It speaks to a lack of decency, and lack of decency may not be illegal but it is wrong and 

that is why I think it requires government intervention and regulation. 

Ms. SUTTON. Thank you. I think you all make the case very well, 

and for one don’t think a company that is paying its executives 

more than $100 million a year has any right asking Americans to 

subsidize these outrageous salaries in the form of increased premiums and stripped down coverage. It is not like you are getting 

more for what you are paying. 

Mr. STUPAK. The gentlelady has yielded back. We have three 

votes on the floor, and the first vote is the rule to allow debate to 

begin on the antitrust exemption if we are going to take it away 

from the insurance industry so it is a rather critical vote and thus 

far it is down basically party lines. So I am going to recess for— 

hopefully we are back here in 20, 25 minutes. And I would like this 

panel to stay if they can. I would love you to stay because you have 

Ms. Schakowsky and I know Mr. Hills, Ms. Capps, and Ms. Eshoo 

all probably had questions too. It has been a good panel. We would 

like you to stay. So let us try to be back in here in about—let us 

call it 25 minutes. This vote might stay open for a little bit. Twenty-five minutes, so we are in recess till 12:25. 

[Recess.] 

Mr. STUPAK. Thanks for coming back right away, all the members. Let us resume this hearing. When I left, I think Ms. Schakowsky, you are up for questions if I remember correctly. And 

thanks to the panel again for staying. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman, and thank you 

panel. You know, it occurred to me that this panel would only take 

place of the industrialized nations in the United States of America, 

that in every other industrialized country, they have made the 

threshold decision that healthcare would be provided in some fashVerDate Mar 15 2010 06:19 Nov 09, 2012 Jkt 076009 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 E:\HR\OC\A009.XXX A009

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ion, maybe through the public sector, often entirely through the 

private sector, but still to all of their people. 

The other thing that occurred to me when we look at all three 

of you, and I guess I would have to add your son, we are talking 

about essentially healthy, high-functioning individuals, not a bunch 

of sick people, which underscores that, you know, it is hard to 

reach hardly any age at all without having some sort of a preexisting condition. 

I had, and I don’t know where they just disappeared to here, this 

is from Blue Shield of California. It is a little old, 2006, a threepage, four column list. It says ‘‘Applicants who have any of these 

conditions listed below may be declined without medical record review.’’ Things like adoption in progress, how about that? Breast 

microcalcifications. I mean, lots of women have that. Diabetes with 

hypertension. We were talking about Diana’s daughter who has— 

pregnancy of self, spouse or significant other. Varicose veins would 

be a preexisting condition that would deprive people of, you know, 

no, you can’t have this insurance. 

I wanted to see if we could put up on the screen, the Committee 

recently learned that these recent premium increases may only be 

the tip of the iceberg. Staff, if anyone here to put up the internal—— 

Mr. STUPAK. There you go. 

Ms. SCHAKOWSKY. There we go. 

[Slide shown.] 

Ms. SCHAKOWSKY. WellPoint analysis of what potential rate increases would do for them. These are various scenarios. The first 

scenario calculates, they call them, SAFs. Those are really rate 

caps. If they left it unchanged, that is, the rates unchanged, the 

second scenario actually proposes to lower the rate caps to 37 percent which is two percentage points lower than the rates that Anthem filed with the Department of Insurance. And the third proposes, and I quote, ‘‘to remove these rate caps completely.’’ The scenario would result, they say, in a maximum of 228.4 percent for 

certain plans. And had this scenario been implemented, over 

27,000 customers would have received a 228 percent increase. 

The fact that they would even consider and do the scenario to me 

is just incredibly shocking, but I guess my conclusion is that we 

cannot just leave the insurance companies in the driver’s seat deciding how they will regulate themselves according to rates. What 

our bill did and what the President’s bill does is establish rate review that could actually prohibit some of these rate increases, and 

I wanted to hear your feelings about that. Let us start with Ms. 

Meister and just go across. 

Ms. MEISTER. Yes, I mean, that is what I said before. We need 

to have a maximum percentage put on of how much insurance companies can raise their rates each year, just like some cities have 

rent stabilization. 

Ms. SCHAKOWSKY. Right. 

Ms. MEISTER. There could be stabilization of insurance rates. 

Ms. SCHAKOWSKY. Let me also say some states do that. I am a 

state that does not, one of the 25 states that doesn’t do any rate 

regulation whatsoever right now. Ms. Henrikson? 


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Ms. HENRIKSON. I am all for a national committee that would review rates. I feel California has been neglectful in that sense. So 

I know it is based on where you live and all that kind of thing, but 

I believe a national rate regulation would be very beneficial. 

Ms. SCHAKOWSKY. It would be called a National Health Insurance Rate Commission I think is what we are talking about. 

Mr. ARNOLD. Yes, I agree with that, too, and I would also add 

that I think if there were rate regulation on insurance companies 

that that would also put pressure on medical providers, hospitals 

and doctors, who we keep hearing are raising their rates so irresponsibly. If that is true, that would force them to change their 

ways as well. 

And just very quickly, what you said about unregulated insurance premiums keep rising, it is true. I mean, my rates went up 

26 percent last year, 38 percent now. Why should I have any reason to believe they won’t try and raise them another 40 percent 

next year? I mean it is logical to think that they would. 

Mr. STUPAK. Thank you. A member of the Full Committee, Ms. 

Eshoo, do you have questions, please, of this panel? And thanks for 

being here. You are not a member—— 

Ms. ESHOO. Thank you, Mr. Chairman. 

Mr. STUPAK [continuing]. Of the Subcommittee but a member of 

the Full Committee. 

Ms. ESHOO. Thank you, Mr. Chairman, for having this hearing. 

I appreciate the opportunity to participate, and I am very glad that 

we have the rules that allow members from other subcommittees 

to join you. This is a very important hearing. 

I want to thank the witnesses. So many members have said you 

really put the human face on this. And while my questions are not 

directly for you but rather the executive, I just thought that I 

would enter for the record, I did write to Ms. Braly, the President 

and CEO of WellPoint, after the news came out about the rate 

hikes up to 39 percent. But I think that it is a telling thing that 

Anthem Blue Cross, the unit, in an email message urged their employees to oppose healthcare reform. And that email is reported to 

have said that reform proposals would ‘‘cause tens of millions of 

Americans to lose their private coverage.’’ And it seems to me that 

this panel is right on the edge, given what the increases were. So 

I think that more than anything else, you have helped to separate, 

you know, the political rhetoric that has gone across the country, 

and really what the facts are because this is your life. You are 

speaking of real-life experiences. I can’t think of a better panel to 

have come in and testified. This case is not over. I think that there 

are, I know that there are, many of us that to our last breath will 

fight for the kinds of reforms that need to take place, both in the 

health insurance industry and healthcare as well because this simply cannot be sustained, not individuals, not families, not local governments, not state governments, not the Federal Government and 

not businesses, either. So thank you for traveling across the country to testify. I admire your spirit, and I like the way you just keep 

following up with members and saying it the way it is. That is not 

often the case with witnesses, so we thank you. 


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Thank you, Mr. Chairman. I am going to have to leave for my 

Intel Committee meeting, but I thank you again for your legislative 

hospitality. 

Mr. STUPAK. Thank you. Well, that concludes questions of members of the panel and of the Committee. So I want to thank this 

panel for coming. Let me just say one thing. Mr. Arnold, in a question that was put to you, a clarification. I don’t want to get into 

the healthcare debate because I think it is more important that we 

hear from you. We have had enough healthcare debates. We need 

to act and move legislation along. But there was some questions 

about your premium, what you would pay and what you would pay 

underneath the House bill as it was passed. I think Mr. Burgess 

asked you some questions along that. Those numbers he was 

quoting you is from Congressional Budget Office, and that would 

take place in 2016. They wouldn’t be what your current premium 

would be, plus underneath the House bill you would have a full 

plethora of services. You wouldn’t be denied because of preexisting 

injury or illness. You have preventative care. There is a number of 

benefits there in the House bill that is probably not covered in your 

current one. So just to clarify the record, that number is thrown 

out to be more than your current policy would be in 2016, and we 

don’t know what your policy would be in 2016 from Anthem we are 

going. So just a clarification. 

Again, let me thank this panel. 

Mr. BURGESS. Mr. Chairman, with all due respect. 

Mr. STUPAK. All due respect, I will let you go for a minute but 

I am not going to let you pontificate for 10 minutes. 

Mr. BURGESS. No pontifications. That was based on the 2009 figures if the bill had passed last year. The Chairman is correct because none of the benefits go into effect for 4 years from the passage of the bill. Taxes of course would go into effect on day one. 

And also, just a point of clarification, Mr. Arnold. You made the 

comment just a moment ago that providers were raising rates irresponsibly. Do you have an example for us of a provider that you 

have encountered that has raise rates irresponsibly? 

Mr. ARNOLD. I don’t, but I think your next witness, Ms. Braly, 

will say over and over again how they are raising their rates. 

Mr. BURGESS. And I am ready for that. I just needed to know if 

you had some information that I needed to be aware of. 

Mr. ARNOLD. No, I don’t personally have specific examples of 

that. 

Mr. BURGESS. Most doctors in my state, and I suspect California 

is the same way, our prices are set by the insurance companies 

which in turn are set by Congress with Medicare rates, and private 

insurance pays a percentage of what Medicare’s maximum allowable fee schedule is, even for those procedures that are not covered 

under Medicare, like childbirth. So I just wondered if you had some 

direct experience because I do intend to question Ms. Braly about 

that extensively. 

Mr. WAXMAN. Will someone yield to me? 

Mr. STUPAK. Yes. 

Mr. BURGESS. I would be happy to yield to—— 

Mr. WAXMAN. Medicare sets rates for the whole country, and it 

turns out that Medicare could be less than what private insurance 


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pays in any particular area. But the private insurance companies 

negotiate the rates presumably with the doctors and other 

healthcare providers. They and Medicare are faced with ever-increasing costs in healthcare. That is a fact. It doesn’t mean that 

anybody is doing anything wrong, but the system is costing more 

and more money, and one of the things we try to do in health reform is not only reform the insurance system so we don’t have people who have to fight on an individual basis to get any opportunity 

to buy insurance at a fair amount, but we try to hold down 

healthcare costs overall, and that is important. So I just wanted to 

raise that point. Thank you. 

And I join with the Chairman in thanking these witnesses for 

being here. You have been terrific. Thank you so much. 

Mr. STUPAK. Thank you again. We will dismiss this panel and 

thanks for your testimony. I would now like to call up our second 

panel of witnesses. 

On our second panel we have Angela Braly, President and CEO, 

WellPoint. Cynthia Miller, Executive Vice President, Chief Actuarial and Integration Management Officer of WellPoint. 

Welcome. It is the policy of this Committee—signs down, please. 

Ms. BRALY. Pardon me? 

Mr. STUPAK. Before we get going, we are not going to allow signs 

and that while we are trying to conduct this hearing, OK? No, just 

put them away. Very good. Thank you. 

It is the policy of this Subcommittee to take all testimony under 

oath. Please be advised that you have the right under the rules of 

the House to be advised by counsel during your testimony. Do you 

wish to be represented or advised by counsel? 

Ms. MILLER. No. 

Ms. BRALY. No. 

Mr. STUPAK. OK. I am going to ask you to please rise, raise your 

right hand to take the oath. 

[Witnesses sworn.] 

Mr. STUPAK. Let the record reflect that the witnesses replied in 

the affirmative. You are now under oath. We will have an opening 

statement. It will be 5 minutes long. If you would like to submit 

a longer statement for inclusion in the record, we will be happy to 

submit it. 

Ms. Braly, if you don’t mind, we will start with you. 

Ms. BRALY. Yes. 

Mr. STUPAK. OK. Just pull that up. There we go. Great. 

TESTIMONY OF ANGELA BRALY, PRESIDENT AND CEO, 

WELLPOINT, INCORPORATED; AND CYNTHIA MILLER, EXECUTIVE VICE PRESIDENT, CHIEF ACTUARY AND INTEGRATION MANAGEMENT OFFICER, WELLPOINT, INCORPORATED 

TESTIMONY OF ANGELA BRALY 

Ms. BRALY. Thank you, Mr. Chairman, and members of the Subcommittee for this opportunity to discuss rising healthcare costs 

and the need for sustainable healthcare reform. This is a very important week for all Americans, and I am sure you join me in hoping that tomorrow’s health summit will be the beginning of a truly 


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constructive, positive process in which every American can have 

confidence. 

I am especially pleased to have been invited to speak with you 

because I understand the burden that rising healthcare costs put 

on families. Because of our role in healthcare, it is often insurers 

who have to deliver the bad news regarding spiraling healthcare 

costs. There is nothing I would like to do better than be able to report to our members that the medical cost trend is going down. 

That is why I appreciate the opportunity to explain why healthcare 

costs are rising not only in California but across the country. The 

increases we are seeing in California are due to factors that we 

have been sounding the alarm about for years, the rise in 

healthcare costs and healthy people opting out of the system when 

other issues arise, such as the tough economic times we are experiencing today. 

These factors led to the rate increases you have seen from our 

company and others in California. Rising healthcare costs are driven by many factors including hospitals and other healthcare providers charging higher rates, new medical technology, underpayment by government programs, the growth in chronic diseases 

and conditions like obesity, and an aging population. These increases are generally compounded when younger, healthier members drop their insurance leaving those who most need healthcare 

to foot the bill. These issues are particularly acute in California 

where our experience has been that medical inflation is in the double-digits. Also in California, we are required to offer coverage 

through two guaranteed issue programs which by themselves lost 

almost $70 million in 2009. Those are important programs that 

serve an important purpose, but their costs are ultimately borne by 

other members in California. 

Unless a legislative proposal addresses the fundamental issue of 

rising healthcare costs, it cannot be considered sustainable 

healthcare reform. Unfortunately, the leading proposals being discussed in Washington don’t do enough to control costs and don’t do 

enough to get everyone into the system. We have put forward substantive proposals on both these fronts. My testimony submitted to 

the Committee includes our specific suggestions on reform, but let 

me highlight just three. 

First, Congress could address defensive medicine and inappropriate care by including meaningful medical malpractice reform in 

the legislation. 

Second, Congress could also require that the principles of evidence-based medicine be used to guide how payments are made. 

While this may seem like a technical issue, it is these kinds of reforms that can have a lasting impact on quality and cost. 

Third, in reforming the health insurance market, Congress must 

enact policies that ensure a broad and stable risk pool as they impose other requirements on the marketplace. 

We know that every facet of the healthcare system, hospitals, clinicians, manufacturers, drug companies, payers, and we as Americans, contribute to the growth and healthcare costs and all need to 

be called upon to reduce these costs. Out of every dollar the Nation 

spends on healthcare, less than one penny goes to health plan profits. Isn’t it time to ask, what are we going to do about the other 


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9 cents? Unfortunately, the deals made with the drug companies, 

hospitals, physician groups, and labor unions left the legislative 

proposals considered thus far without the most important part, the 

core solution for lower cost, higher quality healthcare. 

Rising healthcare costs frustrate all of us. It is a serious problem 

facing the country that deserves not only a serious discussion but 

meaningful action. WellPoint is eager to continue to participate in 

both. While it may be tempting to shift the blame to insurers for 

rising healthcare costs, to do so would be the triumph of sound 

bites over substance. Insurers are among the least profitable part 

of the healthcare system and the part that helps the most in making a meaningful reduction in healthcare costs. Insurance industry 

margins are dwarfed by the margins of others in healthcare. Real 

reform needs to focus on the areas where systematic savings could 

be realized. 

The elephant in the room is the growth of healthcare spending. 

Despite the attention we have garnered in this debate, we are the 

tail on the elephant, and we need to address the elephant. 

Thank you for the opportunity to be here today. This is a critical 

time for our country and for the healthcare debate, and I look forward to discussing with you ways in which we can work together 

to control rising healthcare costs. 

[The prepared statement of Ms. Braly follows:] 


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~ 

WELLPOINT. 

TESTIMONY 

Enabling Health Care 

Quality, Safety and 

Affordability 

Angela Braly 

President and Chief Executive Officer 

Well Point, Inc. 

Testimony presented before the 

Oversight and Investigations Subcommittee 

of the Committee on Energy and Commerce 

February 24, 2010 
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INTRODUCTION 

Thank you, Chairman Waxman and members of the Subcommittee for inviting me to testify 

today. I am Angela Braly, President and CEO of WeliPoint, Inc., and I appreciate the opportunity 

to appear before you to provide information related to the Anthem Blue Cross March 1st 

individual market rate increases for members in California and to explain the increases being 

reported in the media. There seems to be a lot of confusion about the issue, and it is a real 

case-in-point on why we need sustainable health care reform that will specifically address the 

growth in the underlying cost of health care services and that takes into account the need for 

insurance market regulatory changes to be actuarially sound. 

WeliPoint provides health benefits to nearly 34 million members across the country, 

representing nearly one in every nine Americans. Our subsidiary companies serve these 

individuals in the United States through programs and services including medical insurance 

benefits; life and disability insurance benefits; pharmacy benefits, dental, vision, and behavioral 

health benefit services; long-term care insurance; and flexible spending accounts. We also 

serve another 24.S million Medicare beneficiaries in 2S states as a Medicare administrative 

contractor through our National Government Services subsidiary. 

We care deeply about our California customers and the communities we serve as well as all the 

people we serve across America. And we share the concern raised by this Subcommittee and 

appreciate the opportunity to explain why rates-which reflect known and anticipated medical 

costs-are increasing substantially for certain individual members. In addition to being 

California's largest individual health insurer, we are the largest Medi-Cal provider (California's 

MediCaid program), and a HIPAA insurer of last resort (for those individuals exhausting COBRA 

coverage and who do not qualify to be underwritten in the individual market.) We work 

diligently to improve the health and wellness of all Californians. In fact, our participation in the 

state's public programs serving low-income and high-risk Californians is substantially larger 

than other insurers operating in California, including the two largest not-for-profit health plans. 

We take our commitment to advancing quality very seriously, and we continue to implement a 

variety of initiatives to help achieve these goals. For example, Anthem Blue Cross recently led a 

patient safety collaborative in California, working directly with providers across multiple 

geographies to partner with the state's three regional hospital associations to employ 

systematic and sustainable efforts to improve patient safety. These include sharing data, 

resources, and proven, successful safety practices to reduce the incidence of pre-term births, 

and to reduce the incidence of sepsis and other hospital acquired infections (ventilator 

associated pneumonia, central line blood stream infections and catheter associated urinary 

tract infections). We are aggressively taking these actions because focusing on the quality and 

cost of care is the only path to creating a sustainable health care system. 

We have also improved our administrative efficiencies to reduce overall administrative costs 

and improve health care quality. For example, we led the industry in the establishment of the 

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Committee on Operating Rules for Information Exchange (CORE) which has brought together 

more than 115 health industry stakeholders - health plans, providers, vendors, the Centers for 

Medicare & Medicaid Services, associations and others - to help streamline administrative 

transactions to reduce the amount of time providers spend on those transactions allowing 

them to focus on patients. We continuously work to become more efficient and effective as an 

organization and in our interactions with other parts of the health care system. We continue to 

make improvements to ensure that our members receive the most reasonably priced products 

that we can provide while continuing to focus on initiatives to increase the quality of care and 

in turn the health of our members. 

The past few weeks have seen a great deal of attention directed at the recent rate increase that 

Anthem Blue Cross announced for the California individual market. While the March 1st rate 

increases are significant for certain individuals, it is important to note that the rate increases: 

• Relate only to the individual market; 

• Reflect estimated medical trend that is rising due to increases in medical costs and 

adverse selection, as explained further below; 

• Reflect that Anthem Blue Cross provides coverage in the California HIPAA and MRMIP 

programs for which rate increases are restricted and whose losses are borne by the 

individual market; 

• Even if the rate increases were to have gone into effect on March 1st

, the individual 

business in California was estimated to generate an after-tax operating margin of 1.5%; 

• Even after our proposed rate increases, our products remain competitively priced in the 

market; 

• An independent actuarial firm reviewed our March 1st rate filing (rates were filed with 

the California Department of Insurance in November 2009), conduding that the March 1 

rate increase was actuarially sound and the company's methodology was reasonable. 

Anthem Blue Cross has nonetheless agreed to defer implementation for two months to 

allow further review. 

These rate increases related to the individual insurance market where individuals purchase 

coverage directly (not through their employer). This portion of our California membership 

represents approximately 10 percent of our more than our approximately eight million 

members in California. 

As you know, we exist in a competitive marketplace where many individual purchasers are free 

to choose from among a number of carriers. For example, a search for coverage in los Angeles 

from an online broker would yield over 100 coverage options from 7 large insurers. The rate 

increases are not the result of a lack of competition, but rather the underlying cost trends. 

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Raising our premiums was not something we wanted to do - but we believe this was the most 

prudent choice given the rising cost of care and the problems caused by many younger and 

healthier policyholders dropping or reducing their coverage during tough economic times. By 

law, premiums must be reasonable in relationship to benefits provided which means they need 

to reflect the known and anticipated costs they will cover. All health insurers are in the same 

position, and even with this increase our company's premiums remain quite competitive. 

While we believe that an increase in our rates is unfortunate, it is necessary and we welcome 

the opportunity to explain why rates are going up in a challenging economy. 

We would also like to emphasize that we are cooperating with a California Department of 

Insurance review of our March 1" rates. An independent actuarial firm concluded that our 

rates are actuarially sound and necessary, reflecting the expected medical costs associated with 

the membership in these plans. Nonetheless, we have agreed to postpone the March 1" 

increases for two months to allow for additional review. 

OVERVIEW 

Briefly I would like to discuss the causes for the March 1st rate increase in the California 

individual market, and will provide more detail later in my testimony. Generally speaking, the 

cost increase can be broken into two parts: (1) general medical inflation, and (2) a significant 

change in the risk pool, also called "adverse selection". 

• Higher medical costs as reflected by general medical inflation: The increases in 

premium costs are driven by prices charged by clinicians, hospitals, medical device 

manufacturers, pharmaceutical companies and other suppliers in health care that are 

accelerating much faster than general inflation as well as increases in consumer 

utilization. Provider prices increase because of provider rate increases, new technology, 

and by cost-shifting to the private sector because Medicare and Medicaid do not fully 

cover provider costs. In effect, the private sector - including our members-are 

subsidizing the public sector. Experts have found that commercially insured families pay 

almost $1800 more each year for their coverage as a result ofthis cost shiftl. Higher 

patient utilization is primarily driven by a shift in the demographics of this country, 

which has an aging population and rising incidence of chronic disease which can be 

lifestyle related, plus the increasing use of high-cost diagnostiC testing by providers. 

1 Milliman, http://www.milJiman.com/expertise/healthcare/publications/rr!pdfs/hospital-physician-cost-shiftRR12·01-0B.pdf 

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o Premiums ~ Costs 

12.0% 

10.0% 970~.6% 

8.0% 

6.0% 

4.0% 

2.0% 

0.0% 

2004 2005 2006 2007 2008 2009E 2010E 

Source: Millman, eMS, Company documents, Bardays Capital Managed Care 2010 Industry Outlook Report 

• Adverse Selection: In a difficult economy, younger, healthier policyholders who lose 

their jobs and income often sacrifice their health coverage. This means there are fewer 

policyholders among whom to spread risk and those remaining have higher health care 

costs. The result is higher premiums for those left in the pool. 

These are the drivers behind our claims trend, and when we evaluated our claims trend for our 

individual market products in order to set our 2010 rates, we determined that a rate increase 

averaging approximately 25% (excluding aging) was necessary to cover cost trends and adverse 

selection and was projected to result in an after tax operating margin of 1.5%. 

Much has been made of the profit WeliPoint, the parent company of Anthem Blue Cross, 

earned in the last quarter of 2009. However, it is important to review our profits on an 

adjusted basis as explained below. 

Here are a couple salient details to put our fourth quarter results in perspective. We sold our 

Pharmacy Benefit Management unit to Express Scripts, so excluding that one-time gain to 

earnings, our real fourth quarter earnings were approximately $380 million after tax. When our 

annual income is fully adjusted the percentage of net income to total revenue has remained 

generally consistent from year to year as shown below. 

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6.0% 

4.0% 

2.0% 

0.0% 

2005 

Net Income % of Total Revenue 

(Adjusted/Comparable Basis') 

2006 2007 2008 2009 

" Adjusted to remove the after~ta)( impact of realized gains (losses) on investments and other significant non*recurring items. 2009 specifically 

excludes the one-time gain related to the sale of our Pharmacy Benefit Management companies. For comparison purposes, 2005 includes the 

reclassified financial results of WeliChoice which was acquired on December 28, 2005, 

These earnings are in line with other health insurers given our size as the largest insurer in the 

United States by membership, providing coverage to tens of millions of Americans. 

Significantly, our net margin in the fourth quarter on a fully-adjusted basis was 3.5%, again 

completely in-line with our competitors and well below the margins of many other companies 

in the health care industry including pharmaceutical companies, medical device companies and 

others. 

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25.0% 

20.0% 

Profitability of Pharmaceutical 

Manufacturers, 1995-2008 

18 50;0 18,6~/o 18.6% 18 S% 19.6% 19.3% 

17.1'%.16.10;0 170'Yo 15.8% 15.7%, 15,8'% 4.4% 14 3~!0) 

15.0% rut 

10.0% 

~ -I~~~ __ ~~~;~ __ ~LJ~~~Lr~ __ ,L~~~6.o/,_O 2% 9%r~3.o/,~',L~-r~-' I 0.0% 

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 

I_Pharmaceutical Manufacturers _All Fortune 500 Firms I Note: Percent is the median percent net profit after taKes as a percent of firm revenues for all fIrms in the industry, 2007 and 2008 data not 

available from Kaiser. According to Fortune Magazine, the median percent net profit after tax for all Fortune 500 companies in 2007 and 2008 

was 5.7% and 3.7%, respectively. 

Source: Kaiser Family FoundatIon and $onderegger Research Center, Prescription Drug Trends: A Chartbook Upd.lte, November 2001, Exhibit 

4.11 at http://www.kff.org/insurance/3161-index.cfm updated with data from Fortune, Fortune 500 Industry Rankings: April 14, 2003, Vol. 

147, No.7, p. F-26; AprilS, 2004, Vol. 149, No.7, p. F-26; AprillB, 2005, Vol 151, No, 8, p. Fw 28; April 17, 2006, Vol. 153, No.7, p. F-26; April 30, 

2007, Vo1.1S5, No.8, p. F-32; 2007 and htlp:lfmoney.cnn.com/mag;wnes/fortune/; Kaiser Family Foundation, Kaiser Fast Facts, Profitability of 

Pharmaceutical Manufacturers, 1995-2008. September 16, 2009. http l/fact!.};ff.orgfc:hart.aspx?ch=218 

Putting this in perspective, if we returned our entire fully adjusted fourth quarter after-tax 

operating profit back to our members, it would be $5.13 per member month or about $60 per 

year. 

Here are a few additional facts to add some context to the current discussion: 

• The Anthem Blue Cross profit margin in California is in-line with and below that of many of 

our competitors; 

• Both for-profit and not-for-profit health plans must generate revenue in excess of costs to 

ensure they are able to not only pay claims, but also to maintain their solvency and operate 

their business; 

• In California Anthem Blue Cross insures more high-cost, low-income individuals than any of 

our competitors, including the two largest not-for-profit health plans; 

• Despite how our rate increase was reported in the media, we still have many affordable and 

competitive options available in the individual insurance market. Since this is a competitive 

market, many purchasers often shop around for the best value; 

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• The average March 1" rate increase is approximately 25% before factoring in attained 

(actual) age, not the 39% reported; 

• The March 1

st rate increase will apply only to a person who chooses not to change his or her 

product. Switching to a less-costly product is an option we offer members and which many 

choose to do. We offer ten products in the individual market in California-with nearly sixty 

different benefit and premium levels-that provide consumers numerous options for 

affordable coverage. 

DETAILED DISCUSSION OF CALIFORNIA INDIVIDUAL RATE INCREASE 

It is important to note that the proposed March 1st rate increase that is being reported in the 

media relates only to the individual insurance market where individuals purchase coverage 

directly (not through their employer), which represents approximately 10 percent of our 

approximately eight million members in California. Furthermore, the figure of 39 percent being 

reported by the media represents the largest rate increases and includes the impact of aging 

and was experienced by only a portion of our members. Specifically, the rate changes range 

from a 20.4 percent decrease to a 34.9 percent increase excluding the impact of age-category 

changes. Additionally, the rate notices reflect the March 1st rate increase for an individual who 

does not choose to change his or her product to diminish the impact of premium increases, 

which is an option we offer to members and which many individuals choose to do. 

Clearly, we understand that rate increases create a challenge for many of our members. 

However, it is important to know that many of our members often have a choice of coverage. 

We help our members understand their options by making available health plan advisors who 

work with the member to help ensure they understand their coverage options. Further, our 

products remain very competitively priced when compared with the dozens of other plans 

competing in the California individual market, including our two largest not-for-profit 

competitors. Even after these March 1st rate changes, a 40-year old woman in Los Angeles can 

obtain coverage with a $1,500 deductible for as low as $156 per month. 

We would also like to emphasize that we have cooperated and are continuing to cooperate 

with the California Department of Insurance's review of our rates. As part of our review 

process, an independent actuarial firm concluded that our rates are actuarially sound and 

necessary, reflecting the expected medical costs associated with the membership in these 

plans, and that they satisfy or exceed the medical loss ratio required by California law. 

Recently, Anthem Blue Cross agreed to a request by the California Department of Insurance to 

postpone the March 1st rate adjustment for individual members in California by two months to 

allow the Department additional time for review. To avoid confusion for our members, we 

decided to implement the delay for all Anthem Blue Cross individual members regulated at 

either the California Department of Insurance or the Department of Managed Health Care. 

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Anthem Blue Cross filed these rates with the appropriate regulators in November of 2009. They 

are actuarially sound and in full compliance with all requirements in the law. We welcome the 

scrutiny, and are confident that our rates reflect known and anticipated medical costs and are 

established consistent with sound actuarial principles and state law. 

Our decision to agree to postpone the rate increase does not change the underlying facts. All 

health plans are in the same situation in trying to deal with the steadily increasing medical costs 

in the delivery system, which are not sustainable. We are also experiencing a higher proportion 

of healthy individuals choosing not to enroll, leaving an insured pool that utilizes significantly 

more health care services. We need to refocus the health care reform debate toward steps 

that will improve quality and control the underlying medical costs, which is driving the high cost 

of coverage. 

We understand the impact any rate adjustment has on our members and their ability to 

continue to have health insurance. We are committed to improving quality and reducing costs 

in the health care system and improving the lives of the Californians we serve and the health of 

communities all across the state which can reduce their premium rates. Our members will be 

receiving a letter shortly that describes these rate changes in detail and whom to contact for 

additional information about their coverage options. 

Rate increases reflect the increasing underlying medical costs in the delivery system which are 

unsustainable. We hope to continue to work with you and others to help mitigate the factors 

driving these large rate increases, as described below. 

WHY INDIVIDUAL MARKET RATES ARE INCREASING FASTER THAN MEDICAL 

INFLATION 

Health insurance rates increase year-over-year to reflect general medical inflation and other 

factors. Medical costs increase each year primarily due to (1) prices charged by clinicians, 

hospitals, medical device manufacturers, pharmaceutical companies and other suppliers of 

health care accelerating much faster than general inflation, and (2) increases in consumer 

utilization. Provider price increases above general inflation are driven largely by increased 

provider cost-shifting to private health insurers due to Medicare and Medicaid not fully 

covering provider costs, provider consolidation, and higher-priced technologies. Increases in 

consumer utilization of health services are primarily driven by a shift in the demographics of 

this country, which has an aging population and rising incidence of chronic disease (some 

related to lifestyle), plus the increasing use of high-cost diagnostic testing by providers. 2 

For 2010, we expect hospital inpatient and outpatient costs in California to grow by over 

10 percent, driven primarily by hospital reimbursement rates. Additionally, we expect 

, Drivers for rising health care costs are detailed in the 2008 PricewaterhouseCoopers report The Factors Fueling 

Rising Health Care Costs 2008. 

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pharmacy costs in California to grow by over 13 percent. These cost increases that 

continuously drive premium increases are unsustainable and must be addressed. 

National Health Expenditures Per Capita, 

1990·2018 

$14,000 

$12,000 

$10,000 

$8.000 

$6,000 $2,814 

Actual 

$4.000 ~(19".:9~0)_+-<..-4"""_---~ 

$2,000 

$13,100 

rGjcc~ted (2018) 

$8,160 

(2009) 

$O+-~-r'-~~~~T-~~~T-~~~T-~~~~~~~ 

Source: Centers for Medicare and Medicaid Services, Office of the ActuafY, National Health Statistics Group, at 

http://www.cm~.hhs.gov/Nationa!HealthExpendData/ (Historical data from NHE summarylndud!ng share of GDP, C( 1960·2007, file 

nhegdp07.zip; Projected data from NHE Projections 2008-2018, Forecast summary and selected tables, file proj2008.pdf); Kaiser Family 

Foundation, Kaiser Fast Facts, NCitional Health Expenditures per Capita, 1990-2018. March 19, 2009. httP;lIfacts.kff.org!chart.aspx?ch=86Q, 

Other factors result in California rate increases in the individual health insurance market being 

higher than general medical inflation, including: 

• less healthy risk pool in a challenging economy. One dynamic in this challenging economy 

is that individuals are far more likely to keep their coverage if they are less healthy and 

require ongoing medical services, and a higher proportion of individuals who do not need 

services disenroll or choose not to enroll. The result is an insured pool that utilizes 

significantly more services per individual than under better economic times. This in turn 

leads to higher costs in the pool and to rate increases higher than general medical inflation. 

For example, if an insurance pool consists of 100 individuals that incur aggregate medical 

costs of $10,000 per month, the cost per individual is $100 per month. However, if 10 

individuals leave the pool who incur little or no costs because ofthe challenging economic 

times, the $10,000 now must be spread over 90 individuals. The per-individual cost is now 

$111 per month, an increase of 11 percent. This means a health insurer must increase rates 

11 percent in order to cover the increase in costs per individual and this is before reflecting 

general medical inflation. While this dynamic always exists, in a challenging economy it 

becomes more prevalent as individuals who are paying for coverage without a government 

or employer subsidy must choose to continue coverage or use the money for other 

necessities. 

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• Individuals moving to lower-cost options in a challenging economy. Another dynamic in 

our current challenging economy is that a higher proportion of healthy individuals move to 

lower-cost coverage, such as coverage with a higher deductible, than in more robust 

economic times. Our experience also shows that new, healthy enrollees are more likely to 

enroll in similar high-deductible plans. For example, in 2009, affordability concerns led a 

high proportion of Anthem Blue Cross individual members to switch from higher-cost 

products to lower cost-products, resulting in an average 2009 premium increase after 

product migration of just 2 percent, considerably lower than the average rate increase of 

13.8 percent initially reported in 2009. Meanwhile in 2009, the average claims per member 

increased by 8 percent, dramatically more than our premium increase of 2 percent. The 

fact that the weak economy caused more people to move to lower-cost options in 2009 

contributed to the fact that the Anthem Blue Cross individual business in California as a 

whole operated at an approximately $10 million loss during 2009. 

• Individuals aging into a higher age category. The reported March 1st rate increases include 

demographic changes, such as individuals aging into higher age segments. Since rates 

increase by age, a renewing customer will often face higher rates. These age rate increases 

occur before reflecting general medical inflation and reflect higher medical utilization 

associated with aging. 

• "Deductible leveraging." Benefit costs for members are typically divided between the 

premium paid by a member and the member cost sharing (e.g., deductibles and copayments). When a member does not change plans, deductibles and co-payments, which 

are a set cost such as a 20 dollar copayment to see a primary care physician and therefore 

typically remain unchanged at renewal. Because ofthis, the deductible and co-payments do 

not increase and are not connected to necessary increases related to medical inflation. 

Because higher costs due to the increases related to medical inflation must be offset in 

some way, there is a "leveraging" effect and the medical cost increases disproportionately 

increase the premium component of benefit costs (as opposed to the member cost-sharing 

share of benefit costs, which is fixed). This results in premiums for fixed deductible products 

increasing faster than general medical inflation. 

• Higher Baseline Costs. In addition, we experienced higher than anticipated unit medical 

costs and utilization in 2009. Our Anthem Blue Cross individual market rates for 2009 were 

insufficient to reflect these costs. While we are not pricing to recover 2009 losses, the 

March 1st individual market rates must reflect these higher baseline costs 

All of these rating dynamics are part of necessary, actuarially-sound rating practices and each of 

these factors contributed to the March 1st individual market rate increases in California in 

addition to general medical inflation. Other individual market health insurers are facing the 

same dynamics and are being forced to take similar actions. 

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MISLEADING ACCUSATIONS OF HEALTH INSURER PROFITS 

During the past year I have been listening to the health care reform debate and the accusations 

that have been made of health insurers, specifically those related to health insurer profits. I 

was very disappointed to see the health reform debate change from one of possible change and 

productive results to an attack on the health insurance industry, specifically pOinting to our 

profits and citing this as the primary reason for premium increases, which is very misleading. 

Well Point Selling, General and Administrative Expense Ratio Trend 

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* 

• Includes 30 bps for the 4Q09 severance charge relattng to the sale of certain portions of the company's business and other improvements 

and productivity. 

As noted before, our profit margins as a company have declined over the past five years, our 

administrative cost ratio has declined, and yet premiums have increased, reflecting higher 

prices of hospitals, drug companies, and other providers. Additionally, aside from attacks on 

the entire health insurance industry, the debate has seemed determined to create a divide 

between for-profit and not-far-profit companies in the healthcare system. As I have already 

mentioned, in California the Anthem Blue Cross profit margin is in-line with, and below some of 

our not-far-profit and for-profit competitors and are Significantly below other providers, both 

for-profit and not-for-profit, in health care delivery. 

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It is also important to note that according to Fortune 500 magazine, the 2008 profits as a 

percentage of revenue for health care, insurance and managed care were 2.2 percent. This is 

significantly lower than other sectors of the health care industry. 

I Profit as Percent of Revenues 

Source. Fortune List of Profit by Industry. Ma',·~ :C':) S"iect ir.dusilles 

httQ IImoney cnn comtmagazines/fortune/fortune500/2002fQerlormers/industneS/Qfofitsl 

2008 Profits as 

Industry Percent of 

Revenues 

Food and Drug Stores 1.5% 

Health Care - Insurance and Managed Care 2.2% 

Medical Facilities 2.4% 

Health Care - Pharmacy and Other Services 30% 

Specialty Retailers 3.2% 

Insurance - Property & Casualty 3.3% 

Commercial Banks 5.2% 

Food Services 7.1% 

Utilities - Gas and Electric 8.7% 

Oil and Gas EqUipment, Services 10.2% 

Financial Data Services 11.7% 

Medical Products and Equipment 16.3% 

Pharmaceuticals 19.3% 

Internet Services and Retailing 19.4% 

Network and Other Communication Equipment 20.4% 

Studies continue to demonstrate that health insurer net (after-tax) profits are a very small 

percentage of a member's premium. While there are a variety of ways to estimate health 

insurer net profit as a percentage of premium, regardless of the year, company, or aggregation 

of the data we have found that net profits fall between a -3.5 percent (loss) and 6 percent 

(gain), with most falling in the 2 to 5 percent range. To be more specific, the 

PricewaterhouseCoopers studies concluded that the insurance industry's profit margin is 3 

percent. This is consistent with an America's Health Insurance Plans (AHIP) estimate that 

publicly-traded health insurers averaged a 2.4 percent net profit margin over the last 5 years. 

When discussing profits, any comparison of absolute amounts will be misleading. For example, 

if companies merge, acquire other companies, or sell one of their assets, it stands to reason 

that its total profits will be significantly affected by that event. For example, WellPoint's fourth 

quarter 2009 net income was significantly higher due to the gain on the sale of its pharmacy 

benefit management SUbsidiary. After adjusting for this sale, WeliPoint's fourth quarter 2009 

adjusted net income was Significantly less. 

POLICY CHANGES TO MITIGATE VOLATILE INDIVIDUAL MARKET RATE INCREASES 

Several factors contribute to the volatility in the individual health insurance market, including 

the fact that the individual market is the "market of last resort" for individuals who do not have 

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access to the employer market or government-subsidized public programs, and participation in 

the individual market is voluntary (i.e., individuals can forgo coverage). The market exhibits a 

high "churn" rate, with the average individual or family participating in the market for only 

about three years on average. This means that while overall enrollment may remain relatively 

constant, with 1/3 of the risk pool leaving each year, the overall risk of the members can 

increase quickly. This can lead to wide swings in rates-even if the dynamics seem to shift only 

slightly. 

California's individual health insurance market is particularly challenging. In contrast to most 

states that use high risk pools and broad-based funding sources to subsidize HIPAA guaranteed 

issue products (for those individuals exhausting COBRA coverage and who do not qualify to be 

underwritten in the individual market), California requires us to absorb the very high costs 

associated with these individuals without additional funding support. In 2009, Anthem Blue 

Cross alone experienced an approximate $58 million operating loss on these HIPAA purchasers 

who exist in the guaranteed issue product environment in California. Additionally, as a result of 

being the only PPO and the only statewide option in the state's high risk pool (MRMIP), in 2009 

Anthem Blue Cross experienced an additional operating loss of more than $10 million in the 

MRMIP "graduate" program.3 

In November 2008, our industry came forward with an interdependent framework of policy 

proposals that would help control costs and improve health insurance markets for consumers. 

Included in this framework was an effective, enforceable, personal coverage requirement that 

would expand and stabilize the individual health insurance market, even when combined with 

requirements on insurers to accept all applicants with no pre-existing condition exclusions and 

limit rate variation between higher risk and lower risk individuals. In the proposal, we 

emphasized that the entire framework rested on a meaningful and effective personal coverage 

requirement that ensured that virtuaUy everyone would have health coverage. As shown in 

some of the examples above, even if a small fraction of healthy individuals choose to forgo 

coverage, it can lead to substantial rate increases and an environment where individuals 

purchase coverage only when services are needed. Ultimately, an effective personal coverage 

requirement must (1) be deployed with sufficient subsidies to ensure no one is exempted, (2) 

include sufficient "checkpoints" to make sure everyone is enrolled for coverage, and (3) contain 

sufficient penalties to ensure healthy individuals enroll in coverage rather than pay the penalty. 

Unfortunately, the proposed personal coverage requirements in the health care reform 

legislation passed by both houses of Congress failed all three requirements by (1) exempting 

tens of millions of Americans from the requirement, (2) using the tax filing process as the only 

checkpoint which misses tens of millions of Americans who do not file taxes, and (3) including 

penalties that are a small fraction of the cost of coverage. Under this framework, it is only 

logical that many individuals-primarily those who are healthy-would have not been 

, For a period of time until 2008, members in California's high risk pool (MRMIP) were limited to being MRMIP 

members for three years. After three years, individual market carriers were required to accept these members on 

a guaranteed issue basis. 

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effectively included by the mandate or would have made the logical choice to pay the penalty 

unless they needed health care services. The result will be a national health insurance market 

that is similar to New York, where the average individual market premium is over twice the 

average individual premium in California.4 And this is a finding borne out by analyses 

completed by our senior actuaries. In fact, these analyses showed that the legislation 

considered by Congress would increase California individual market premiums for the young 

and healthy by as much as 106 percent (before premium subsidies for certain eligible 

individuals).s The personal coverage requirement must be substantially improved for reform to 

be successful. 

, AHIP Individual Market Survey. October 2009. 

http;(/www.ahipresearch.org!pdfs!2009IndividuaIMarketSurveyFinalReport.pdf 

S WeliPoint premium impact analysis; http;!lwww.wellpoint.com(newsroom(stats facts.asp 

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CONCLUSION 

In closing, I want to assure the Subcommittee that Well Point supports responsible, sustainable 

health care reform that will specifically address the growth in the underlying cost of health care 

services and also take into account that insurance market regulation must be actuarially sound. 

Reform must go beyond the insurance marketplace to address system-wide challenges and 

associated costs. Changing how we finance health care without changing how we deliver 

health care is simply not sustainable. 

Additionally, we firmly believe that the primary focus of responsible health care reform must be 

improving quality and controlling the underlying medical costs, which is what is driving the high 

cost of coverage. On a national scope we continue to see hospital margins rise whicli impacts 

our underlying medical costs. 

8% 

7% 

6% 

5% 

4% 

3% 

2% 

1% 

Aggregate Total Community Hospital 

Margins, 1980-2007 

.. 6.0% /\ /5.6% / \ 

.<.6% \3.8% 

6.7°/11 

5.8% 

5.3% 

1980198519901995199619971998199920002001200220032004200520062007 

Note: Total Community HDspital Margin talculated as the difference between total net revenue and total expenses, divided by total net 

revenue. 

SQurce: Amencan Hospital Association and Avalere Health, Avalere Health analysIs of 2007 American Hospital Association Annual Survey data, 

for community hospitals, Trendwatch Cnortbook 2009, Trends Affecting HOspitals and Health Systems, Table 4.1, p. A-32, at 

http://www.aha.orgiahaitrendwCltch/chartbookl2009/appendbe4.pdf' Kaiser family foundation, Kaiser Fast Facts, Aggregate Total Community 

Hospital Margms, 1980-2007. September 16, 2009. http://facts..kH.orglc:hart,aspx7c:h-1S9, 

We believe that the government must take action in this area to facilitate higher levels of 

quality and efficiency. We believe that an essential ingredient for practical and sustainable 

health care reform is improving health care quality, which in turn can help manage costs. There 

are many opportunities to improve health care in this country, as we are far from having a 

system that provides the right care at the right place at the right time. Building on the following 

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principles, WeliPoint has identified solutions that will help deliver better health care while 

helping to reduce costs: 

• Promote evidence-based medicine, with focus on outcomes; 

• Align payment incentives for improved health outcomes; 

• Focus on prevention and managing of chronic illness; 

• Provide transparency on medical errors and reform medical malpractice laws; 

• Promote safety and efficiency through the adoption of health information technology. 

Health plans have provided significant ideas for reform, some of which are incorporated in the 

legislation being considered in the House and Senate. Unfortunately, neither of the bills 

currently being considered by Congress will stem health care cost growth and the resulting 

insurance premium increases, rather higher premium increases are expected to result. We look 

forward to continuing to playa constructive role by providing members of this Subcommittee 

and your fellow legislators with assessments of how proposals for reform would impact your 

constituents. We have decades of real-world experience with different reforms in various local 

markets that we are sharing with Congress and the Administration, so that our policymakers 

can make decisions using the best available evidence of what works best. 

But as the health reform debate continues, our main focus will remain on improving the lives of 

the people we serve and the health of our communities. We do this every day by: 

• providing clear, actionable, evidence-based messages to our members and their 

physicians, and by connecting our health care system through health information 

technology; 

• encouraging an informed physician-patient dialogue regarding the risks and benefits of 

available treatment options and what is best for each patient; 

• deploying thousands of nurses, physicians, and other health professionals to support 

and empower members in their own care; and 

• promoting innovation through an unbiased, transparent scientific analysis of clinical 

research and real-world outcomes. 

We recognize that with the largest membership of any private insurer, we have the ability to 

change health care for the better. We also recognize that, with this ability, we have a 

responsibility to our members and to all Americans to advance health care quality, safety, and 

afford ability, and to invest in innovative solutions to address the persistent health problems our 

country faces today and anticipate the challenges of the future. As a family of primarily Blue 

Cross or Blue Cross Blue Shield plans, WeliPoint has decades of experience in our local markets 

and communities from California to Maine. We believe this blend of national scope and local 

depth is a unique and powerful combination that contributes greatly to our ability to improve 

the quality and value of our members' health coverage. 

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Thank you for this opportunity to explain the factors behind our March l't rate increases in 

California's individual health insurance market and my views on the need for meaningful and 

sustainable health care reform. 

I appreciate the opportunity to testify before you today and to respond to your questions. 

18 
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Mr. STUPAK. Thank you, Ms. Braly. Ms. Miller. 

Ms. MILLER. I have no prepared statement. 

Mr. STUPAK. Oh, you’re not going to do a—OK. Well, let me ask 

this question. Let me ask about WellPoint’s motivations and increasing premiums. I have sort of mentioned it and others have 

mentioned it. WellPoint’s executives, and in a way, Ms. Braly, you 

asserted the profits were not a motivating factor in raising the premiums in California. In written testimony you indicated that you 

were disappointed that the critics cited profits as a primary reason 

that companies were increasing the cost of premiums. 

So let me ask you this. Right there is a document book on Tab 

13. Please take a look at Tab 13 if we could put it up on the screen. 

[Slide shown.] 

Mr. STUPAK. It is an email that was sent on October 7. It is in 

response to a voice mail—and in fact, I think you are the one who 

left the message, senior corporate actuarial wrote the average increase is 23 percent and is intended to return California to a target 

profit of 7 percent versus 5 percent this year. 

So my question is, were you attempting to raise profits to 7 percent then in California by increasing the premiums? Was that the 

purpose behind this email? 

Ms. BRALY. I think Cindy Miller was going to respond to that because the email—— 

Mr. STUPAK. It was to her, right. 

Ms. MILLER. Yes, it is important to understand that that email 

was during the process of setting the rates, and it only refers to 

part of our California individual business. I think it makes reference to the fact that we had a 5 percent profit and are in that 

block. 

Mr. STUPAK. In the previous year, right? 

Ms. MILLER. In 2009. That in fact did not turn out to be the case. 

We lost money in the individual market in 2009 on our California 

business, and the profit that we have targeted in the rate increases 

that we have asked to implement for 2010 is less than 2 percent. 

Mr. STUPAK. But the email basically says we have got to get the 

7 percent if—got to increase our premium 7 percent so we can add 

that 7 percent profit. We have got to increase our premiums, right? 

Ms. MILLER. The email was sent on October 7, the rates weren’t 

filed until November 7th, and experience on that block—— 

Mr. STUPAK. Well, let me ask you—— 

Ms. MILLER [continuing]. And the medical claims continued to escalate more than we anticipated—— 

Mr. STUPAK. Sure. Let me ask you one about November 22 then 

if it was filed on November 7. Go to Tab number 22. On it, it is 

an email of November 2, and then you said you filed on November 

7 from Brian Curley, WellPoint’s Regional Vice President and Actuarial wrote, Note, we are asking for premiums that would put us 

40 million favorable. One week earlier, Mr. Curley informed Brian 

Sassi, the President and CEO of WellPoint’s Consumer Business is 

that if we get the increases on time, we will see an op gain upside 

of 30 million after downgrades and rate cap. 

I guess my concern is we say publicly we are not increasing rates 

to increase our profits, but yet, these emails sort of indicate that 


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you have to have a minimum increase in order to maintain profit. 

Go ahead. 

Ms. MILLER. Well, again, it is important to remember what I just 

said which is the lost money in the individual market in California 

in 2009, and that is not a sustainable business market. So certainly 

we are talking about profit increases in absolute dollars, but again, 

when you look at the profit margin that is built into the rates for 

2010, it is less than a 2 percent profit margin. 

Mr. STUPAK. Well, OK, but look, we have seen your internal corporate documents that you used a variety of accounting mechanisms to sort of manipulate the profit figures. Look, we have seen 

at least five different accounting measures used to describe profits. 

The methods include pre-tax income, post-tax revenue, operating 

gains, underwriting margins and profits. If I remember correctly, 

WellPoint, at the end of 2009 in the last quarter, the last 90 days, 

their profit was $2.7 billion or something like that, right? 

Ms. BRALY. Well, let me speak to that because the fourth quarter 

of ’09 was the quarter in which we sold our pharmacy benefit management company. That is a company we had had and invested in 

for years, and our belief was that by selling that company and 

partnering with Express Scripts which is a pharmacy benefit management company, we could do the important thing that many of 

these panelists described which is getting lower-cost drugs for our 

members by that combination. So if—— 

Mr. STUPAK. Great. 

Ms. BRALY. And those earnings now are, you know, no longer 

part of our company because we have sold that. And so when you 

look at our total earnings for 2009 and look at our net margin 

which is an appropriate measure to look against other elements, we 

were at 4.8 percent. That was our margin—— 

Mr. STUPAK. That was your margin? What does that equal in 

real dollars in 2009? 

Ms. BRALY. That was about $2.385 billion. 

Mr. STUPAK. OK. 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 and hopefully 2010 will be better. But 

what I am concerned about is our hardworking Americans are asking to increase their premiums to the wealth of WellPoint’s investors. I mean, look it, yesterday you had the hearing yesterday in 

California, right, on the rate increase and Anthem President 

Margolin, is that how you say that, defended the profit margin during the hearing and he is saying it should be about—the 5 percent 

is a figure that he said would be acceptable. In fact, he said we 

have no interest in profit beyond the range I have described to you, 

2.5 to 5 percent is reasonable in their appropriate profits. But 

when your policyholders are taking a hit like the last panel see, everyone of them were self-employed, they are individual, you know. 

It is that group, basically self-employed people, they have taken 30, 

40, 50 percent hit, but it seems like every year you have got to 

have a profit. Is it reasonable to expect every year companies are 

going to have profits and we got to have at least 2.5? It would be 

great if we could guarantee every business to have 2.5 to 5 percent 

profit. What the heck, you are at 7 percent or more. 


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Ms. BRALY. You know, actually, over a 5-year period, our profit 

margin has declined. We continue to get more efficient as a company and as a business, and we are working hard to reduce 

healthcare costs and improve access to high-quality, affordable 

healthcare. 

So it is important to be a business that sustains, that we have 

an appropriate profit, and we think a 4.8 percent margin on a relative basis is very efficient. And when you look at that compared 

to others in the healthcare system, you know, biotech companies 

are 23 percent profits, pharmaceutical companies are in the 20 percent profit. We have a chart in our written testimony describing 

that even community-based hospital margins are in the 6.9 percent 

profit margin. So we are part of the healthcare system that is striving to get to more affordable healthcare for all our members. 

Mr. STUPAK. The only way we will get more affordable is to 

knock off these profits that are being paid for by the average American. I mean, I don’t mind you making a profit, but at the end of 

the year, 2009, a horrible year, you still made $2.-something billion 

and that is not enough? 

Ms. BRALY. And we serve 34 million Americans across the country, and we feel that it is appropriate for our business to be sustained so that we can be there for those members when they incur 

those healthcare costs. We want to be solvent as an organization 

and be able to continue to invest in ways in which we can get to 

a more affordable, higher-quality healthcare equation. 

Mr. STUPAK. Sure, and I don’t mean to inject the healthcare debate in this whole deal, that is why so many of us believe in a public option. You are killing the average consumer. They can’t afford 

anymore. We have got to put an option up there. Today we are 

doing the antitrust exemption. Hopefully that helps. 

My time is way over. Mr. Burgess, please, for questions. 

Mr. BURGESS. Thank you. I appreciate you all being here today. 

I appreciate having an actual actuary here at the table. It is a 

shame that we don’t have the state actuary, and you all could compare notes because I presume you prepared some actuarial findings 

and presented those to the State Board of Insurance, is that correct? 

Ms. MILLER. Yes, my team does, by law, is required to do rate 

filings in which we certify that the rates meet the law and are reasonable. In addition, we have an independent, outside actuarial 

firm, Milliman, probably the most respected firm in the country, 

also verify that they thought our rates were reasonable and appropriate and met the law. 

Mr. BURGESS. And those went to state regulators? 

Ms. MILLER. Yes. 

Mr. BURGESS. When was that? 

Ms. MILLER. Our filing was on November 7. The independent actuary reviewed the filing in mid-November and issued a letter on 

December 15 that they believed that rates were appropriate. 

Mr. BURGESS. Is it possible for you to provide this Committee 

with a copy of that letter? Do we have that in our evidence binder 

somewhere? 

Ms. MILLER. I believe so. 


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Mr. BURGESS. We could get a copy of that letter or we already 

have it? 

Mr. STUPAK. We may already have it. It is not in the evidence 

binder. 

Mr. BURGESS. OK. And then what was the response of the state 

regulators to the actuarial information they were provided? That 

this was outrageous? How dare you? 

Ms. MILLER. By law, the state is supposed to respond within 30 

days to the filing. We heard nothing from the state until actually 

Christmas Eve, and on Christmas Eve we got several questions 

from the actuary about one of the products, our Smart Sense product, and the filing for that. We responded to those questions, and 

then we heard nothing else from the Department of Insurance until 

the news broke of the rate increases in the LA Times. 

Mr. BURGESS. I see. You know, you had to know this was going 

to be trouble. I mean, a 39 percent rate increase in this climate? 

You know what we have been doing up here the last year? 

Ms. BRALY. Yes. 

Mr. BURGESS. You know what is happening at the White House 

tomorrow? 

Ms. BRALY. Yes. 

Mr. BURGESS. You knew this was going to be trouble. 

Ms. BRALY. Yes. 

Mr. BURGESS. You did the report on Christmas Eve. You know 

what else happened on Christmas Eve? They passed a bill in the 

Senate. So you knew the landscape into which you were entering, 

correct? 

Ms. BRALY. Correct. 

Mr. BURGESS. Did you make a judgment as to whether or not 

this was the best time to do this? 

Ms. BRALY. You know, it is always a challenging issue to raise 

rates. And to address the issue that many have brought up, you 

know, our desire is to have more members. Our goal is to continue 

to serve members and have more members. It is not easy. It is difficult to continue to have to raise rates. The process was under way 

clearly. The rates had been filed. We had had this certification 

also—— 

Mr. BURGESS. I don’t want to interrupt you, but I am going to 

run out of time. You see how mean he is? 

On Tab 18, where we talked about the rate increases, we also 

talked in an email about a cushion to allow for negotiation, margin 

expansion. Kind of sounds like what we do with appropriators. We 

ask for twice what we need, hoping they will give us half of what 

we ask for. So did you file this with a cushion, this 39 percent? 

Ms. BRALY. Cindy can speak to that specifically. I think it is important to note that when you look at the individual products in 

California, because of our participation in the HIPAA and what is 

called the Mr. Met graduate program, a high-risk pool option. We 

did have in 2009 a $68.9 loss when combined with the individuals 

who buy the products in the open market. Our loss was about $10 

million altogether. So when we price this product for the rates for 

2010 that were filed with the Department, they assumed we would 

have a margin of about 2.4 percent or an after-tax margin of about 

1.4 percent. 


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Mr. STUPAK. And you feel that even though you knew you were 

going to get significant negative publicity because of those facts, 

you would be able to justify what the rates were? 

Ms. BRALY. The rates, on average—— 

Mr. STUPAK. You can do it. You can add publicity, right? 

Ms. BRALY. It is a difficult situation, and even to break even, the 

rates would have been in the 20s in terms of overall average, the 

overall average. And we were concerned which is why we also 

capped the rates at the top and at 39 percent because we did not 

want rates for individuals to go in excess of that cap. 

Mr. BURGESS. I am going to run out of time, and I must ask because it has come up already. Do you have doctors who are unconscionably raising their rates in your network? My experience with 

most insurance companies was we took what you gave us. We really didn’t negotiate. With all respect to the Chairman, Medicare sets 

the rates, you guys come in and say we will pay a percentage of 

Medicare, take it or leave it and that is the end of it. That is the 

so-called negotiation that we went through. Is California substantially different from Texas? 

Ms. BRALY. No, we can talk about what the trend is with the 

physician trend versus the hospital trend is a much more significant driver, and the pharmaceutical trend is a much more significant driver than that. 

Mr. BURGESS. Thank you. The hospital trend and the pharmaceutical trend is a much more significant driver. 

Ms. BRALY. Right. 

Mr. BURGESS. If you took all physician reimbursement off the 

table, you would have a one-time savings of from what I read anywhere between 5 and 18 percent. It is not the biggest driver in 

your book of business, I suspect. 

Ms. BRALY. We think the physician trend is around 6 percent in 

California. 

Mr. BURGESS. That sounds—— 

Ms. BRALY. And so the hospital trend is 10 and the pharmacy 

trend is 13. 

Mr. BURGESS. And of course, all of the expenditures do flow 

through generally through the physician, that is, if a physician 

doesn’t write the order, write the script, the patient doesn’t get the 

treatment or the prescription. 

So although they are a very small part of the actual cash outlay, 

they do control or they tend to be a driver or a constrictor of costs. 

I have always wondered why we try to ratchet down physician payments. Doctors are normal people that you say we are going to 

ratchet it down? We try to do more to catch up, and therefore we 

see more patients, order more tests, write more prescriptions just 

because our throughput has to increase in order to pay our overhead. Have you guys ever looked at a corporate level of maybe if 

we pay doctors differently we could actually get control of this cost 

curve? 

Ms. BRALY. Absolutely. We think the partnership with doctors is 

the key to changing the reimbursement system so that we are paying for outcomes rather than—— 

Mr. BURGESS. Now, you know that there is a representative in 

California named Pete Stark who will not allow that sort of interVerDate Mar 15 2010 06:19 Nov 09, 2012 Jkt 076009 PO 00000 Frm 00085 Fmt 6633 Sfmt 6633 E:\HR\OC\A009.XXX A009

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action to occur, right? That partnership between doctors, insurers 

and hospitals? 

Ms. BRALY. I think that is an important part of the future of the 

reimbursement system, to partner with doctors, to look at different 

ways to reimburse—— 

Mr. BURGESS. But we can’t. Under Stark laws, we will all go to 

jail. So that is off the table. Is there any other way we could do 

that? 

Ms. BRALY. We think there are elements around medical malpractice reform where if doctors understood that they would be protected if they followed evidence-based medicine, that question that 

you raised, you know, the most expensive thing in healthcare is the 

pen and the doctor’s hand. If we can make the doctors, you know, 

protected and be willing to and be able to focus on evidence-based 

medicine, then I think we will get at those procedures or those 

tests or diagnostic tools that may be used successfully. 

Mr. BURGESS. Yes, unfortunately that is one thing that is off the 

table in tomorrow’s discussion. We really aren’t going to talk about 

tort reform, I don’t think, other than a very superficial way. We 

will say caps, they will say no way and that will be the end of the 

discussion. Thank you. 

Mr. STUPAK. Thank you, Mr. Burgess. Maybe we can get a 

chance to get another round in. Mr. Chairman, Mr. Waxman. 

Mr. WAXMAN. Thank you very much, Mr. Stupak. California has 

a tort reform law. In fact, we have the law that the American Medical Association would like to have for the rest of the country. Are 

you saying that that has held down costs in California? 

Ms. BRALY. Well, clearly the costs in California continue to rise, 

and we have a number of issues that relate to healthcare costs in 

California. For example, we have seen—— 

Mr. WAXMAN. Well, I don’t want to know all the issues, but you 

said if we had a medical malpractice system, that would be one 

way to hold down costs. California has one. It hasn’t been sufficient 

to hold down costs to keep you from raising the premiums, you 

asked for 25 percent increase. In your written statement you said 

raising our premium was not something we wanted to do. So your 

senior executives as WellPoint determined that a rate increase 

averaging approximately 25 percent was necessary, is that right? 

Ms. BRALY. That is correct. 

Mr. WAXMAN. OK. Now, I would like to ask you about a document produced from your internal files at WellPoint. On October 

24, 2009, Mr. Shane, a Senior WellPoint Actuary, emailed Mr. 

Sassi, the head of WellPoint’s Individual Market Division, and let 

me put up that email. 

[Slide] 

Mr. WAXMAN. Mr. Shane writes that WellPoint executive must 

reach agreement on a filing strategy quickly, specifically in the 

area of do we file with a cushion, allow for negotiations, or do we 

file at a lower level that does not allow for negotiations. This email 

says that you were considering filing a rate increase that was padded because you expected California to reduce your proposed increase. Is that an accurate conclusion to reach? 

Ms. BRALY. I don’t believe so, and Cindy described these emails— 

earlier in the process there was a question of what the medical 


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trend would be. What we filed did have a margin of 2.4 percent on 

an operating margin basis or 1.4 percent. And it reflected the trend 

that we were experiencing in California. So there was not a cushion in the rate that was filed. 

Mr. WAXMAN. Well, it is hard to understand these words differently because the words say a cushion allowed for negotiation. 

You decided you needed 25 percent, but it sounds like you were 

willing to go to 20 percent. There was a presentation prepared for 

your board of directors. The presentation outlined WellPoint’s strategic plan for individual line of business for 2010, and let me put 

that slide up on the board. 

[Slide] 

Mr. WAXMAN. This slide is titled, Key Assumption: Individual 

Pricing. It distinguishes between your rate ask and the actual rate 

increase you are assuming for 2010. And according to this slide, the 

2010 rate ask is listed as 25 percent to 26 percent, but the assumed 

2010 rate increase is just 20 percent. This seems to say that you 

were asking for a 25 percent increase but expected to see that lowered to 20 percent through negotiations. That sounds like padding. 

How do you respond? 

Ms. MILLER. I will respond to that since my team was responsible for the rate filings. It is important to note that this was prepared before the rate filing, before the rates were finalized, and it 

recognized the fact, the political reality that departments of insurance have political pressures and often will change rates in response to those pressures. What turned out to happen is that medical costs continue to escalate through the latter part, the last 

three months of 2009, and the 25 percent rate increase became necessary to achieve, as Angela said, a profit margin of less than 2 

percent on an after-tax basis. 

Mr. WAXMAN. Well, it sounds like what you are saying is you 

prepared to ask for a rate higher than what you needed as a negotiating tool. You could have anticipated rates were going to go up, 

and you had to make a decision. You wanted an average increase 

of 15 percent, but you were really looking at an average increase 

of 20 percent. You can see the document says assumes 2-month approval delay, lowering rate increase 5 percent. This says exactly 

the same thing as a presentation to your board. It says that you 

are asking for more than you need because you build in a large 

cushion. Here is what I think is going on. You are raising your 

rates far above what is necessary. You are trying to squeeze every 

dollar of profit you can out of policyholders in California and across 

the Nation, and at a time when families across the Nation are 

struggling to pay their bills, you are trying to charge them inflated 

rates that pad your profits and support the salaries and the trips 

and the treats and everything else. 

Ms. BRALY. Mr. Chairman, we have described in 2009 in the individual business in California, our prices were not adequate to cover 

the losses, for example, in guarantee issue part of the products that 

are required to be covered, and we had a loss. And our pricing that 

was filed and certified or reviewed and evaluated by other actuaries confirmed that the—— 

Mr. WAXMAN. Other actuaries, meaning the state actuaries? 


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Ms. BRALY. Milliman came in specifically at our request to evaluate—— 

Mr. WAXMAN. You indicated you were trying to be more efficient 

to hold down these costs. Is the biggest deficiency that you produce 

trying to shift people onto plans where they have to come up with 

more money out of pocket so that you don’t have to pay that 

amount? 

Ms. BRALY. No. In fact, we could be making less money when 

those members shift to products that have less benefits. Our goal 

is to make sure that we have product offerings for—— 

Mr. WAXMAN. Well, we heard three witnesses this morning as did 

you. You were sitting here. All three of them seemed reasonably 

healthy, but all three of them were told they were going to get a 

39 percent increase, not the average of 20 or 25, 39 percent increase. But they were in luck. They could get a plan that would 

cost less, they just have to pay more out of pocket for their drugs 

because you wouldn’t cover the brand-name drugs or they would 

have to come up with greater or higher deductibles. Is that efficient? 

Ms. BRALY. What we try to do—— 

Mr. WAXMAN. Is that inefficiency? 

Ms. BRALY [continuing]. Is we try to make sure that the customer can get access to a product that they want and afford and 

provides them the benefits they need. For example, last year—— 

Mr. WAXMAN. Well, they would like to have what they have been 

paying for and not have to have increases every year that they 

have been seeing. 

Ms. BRALY. And as reflected, as the pool of insured changes because sometimes healthy younger individuals leave and we have 

people that stay in the pool that are more expensive. The cost overall of the pool continues to go up. That is the critical—— 

Mr. WAXMAN. So you would argue that we need a pool that includes everybody, is that right? 

Ms. BRALY. Correct, that is—— 

Mr. WAXMAN. Therefore if you are pooling people together, then 

you don’t need these individual risk analyses because you are 

spreading the cost. Is that what you are telling us? 

Ms. BRALY. We are an advocate for reform that would include the 

elimination of preexisting conditions provided that there is a mechanism to keep everyone in the pool so that you don’t have this phenomenon. 

Mr. WAXMAN. That is what the bill does that passed the house. 

That is what the bill does in the Senate. That is what the President has been calling for. Let us get everybody insured, and let us 

put them in a pool and then you spread the risk. What the individual insurance markets seem to be doing, if you have got an illness, you are not even going to be considered for consideration. If 

you are in the plan and you have got some illnesses, we are not 

going to drop you but we are going to shift you to another plan 

where you pay more money out of pocket. And you are individualizing insurance so that the individual has no leverage. They 

have to pay what you ask or drop down to something else. 

Ms. BRALY. The actuary analysis is not based on an individual’s 

health status. It is based on who is in the pool. But to your point 


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about the healthcare reform, I think it is important. The concept 

and the goal was to eliminate preexisting and get everyone in the 

pool. But what happened in both of the bills that we have seen is 

that the effectiveness of keeping someone in the pool really fell 

apart as the legislation was moving forward. And the great concern 

is you wouldn’t keep everyone in the pool because you don’t have 

the right mechanisms in place to keep them in the pool and they 

would opt out. 

Mr. WAXMAN. What would you do to keep people in the pool? 

Ms. BRALY. We would make sure that there was a continuous 

coverage requirement so if—— 

Mr. WAXMAN. Somebody says I don’t want insurance. What 

would you do? What would you do to that individual or family that 

says, I don’t want to pay this. I can’t afford it. I’m not going to pay 

it. What do you do to them? 

Ms. BRALY. Right, and then there should be an enforceable and 

effective penalty of some sort that catches all individuals and a requirement to have continuous coverage because people jump in and 

out of coverage in Massachusetts where there is a mandate. They 

jump in, consume healthcare, dump their policy, jump out, and the 

costs continue to escalate because they dealt with coverage and not 

cost. 

Mr. WAXMAN. I think we tried in that House bill to cover everybody and require that everybody get coverage, spread the costs out, 

and we didn’t get a lot of support from the insurance industry for 

the House bill, let alone the Senate bill. 

I have certainly gone way beyond my time. Thank you, Mr. 

Chairman. 

Mr. STUPAK. Ms. Schakowsky for questions, please. 

Ms. SCHAKOWSKY. First, Mr. Chairman, on behalf of Representative Eshoo, I would like to add to the record a letter that she wrote 

February 11, to Ms. Angela Braly. Could I have unanimous consent? 

Mr. STUPAK. Without objection—let us see it first. 

Ms. SCHAKOWSKY. OK. I will hand it to you. 

[The information was unavailable at the time of printing.] 

Ms. SCHAKOWSKY. In the letter that representative Eshoo wrote, 

she quotes from your Anthem Blue Cross unit in an email message 

urging your employees to oppose healthcare reform, and it is reported to have said that reform proposals would ‘‘cause tens of millions of Americans to lose their private coverage. And she makes 

the point that the 39 percent rate increase flies in the face of this 

concern for those who would supposedly lose coverage. I wonder if 

you could respond to that. 

Ms. BRALY. I would be happy to. We are very concerned with the 

legislation that was being proposed because we didn’t feel like it 

addressed that concept of addressing, getting everyone in the pool, 

and as a result, that, with combined with some other changes that 

were proposed, including changing the age rating. Our actuarial 

analysis, which we shared publicly and have available on our Web 

site—— 

Ms. SCHAKOWSKY. What is the age rating you use? 

Ms. BRALY. It varies by state, and Cindy could probably give the 

details around California, but constricting the age restrictions, we 


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found that individuals, young individuals, in California would see 

in excess of 106 percent rate increase and that was before trend. 

So that would be in addition to the rising healthcare costs that we 

saw as well. 

Ms. SCHAKOWSKY. You began by talking about how happy you 

were to be here to talk about rate increases. I want to remind you 

the name of this hearing. It is Premium Increases by Anthem Blue 

Cross and the Individual Health Insurance Market. And what I actually expected was not for you to come and lecture us about what 

we should put in our bill but actually to explain to us, and a good 

start would have been to answer some of the concerns. I don’t know 

if you were here for the testimony of Jeremy Arnold who talked 

about a whopping 74 percent increase that he has experienced or 

Julie Henriksen who I just calculated pays $24,504 a year. And if 

I am correct, if I heard you correctly, you never even met the deductible. So you paid this amount, but you really didn’t get any 

benefit from the health insurance because you didn’t meet the deductible, or respond, and it would be nice if you would because she 

wrote you letters talking about how she realized for months she 

had been paying for a costly, unnecessary benefit, switch plans, 

and finally did get a letter that her premiums were going to be 

raised 38 percent, although she could change to a lesser coverage 

and pay only 16 percent. Isn’t that fabulous? 

I do have a couple of questions, but I want to tell you something, 

that I think that a 39 percent rate increase at a time when people, 

Americans, are losing their jobs, losing their healthcare, is so incredibly audacious, so irresponsible. You know, we see these lavish 

retreat places. I would be interested to know what your salary is 

as the CEO, the incredible CEO salaries. I don’t know how many 

people it was said that make over $1 million a year at your company. How much money do you make? 

Ms. BRALY. My salary is $1.1 million. I receive stock compensation. I received stock compensation with the value of $8.5 million, 

and last year an annual incentive payment of $73,000. 

Ms. SCHAKOWSKY. Well, of course, it makes sense then that you 

would need a big rate increase now that you told us that. You said 

in your written testimony that Anthem Blue Cross profit margin is 

in line with and below that of many of your competitors. Can you 

name any California competitors who have raised their rates up to 

39 percent? 

Ms. BRALY. Yes, we believe that a number of our competitors 

have raise rates. In fact, in the individual market, there are products that are available. Our products are competitively priced and 

in many cases lower priced than many of our competitors, both forprofit and not-for-profit—— 

Ms. SCHAKOWSKY. They got approved by the commission for more 

than—— 

Ms. BRALY. They are outstanding and available now. 

Ms. SCHAKOWSKY [continuing]. 39 percent? 

Ms. BRALY. We are a very efficient company on a relative basis, 

and our administrative costs continue to go down. And so we do 

have very competitive rates in the marketplace. Many times they 

are less expensive than other products that are currently available. 


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And there are a number of competitors in California, and our rates 

are quite competitive in the marketplace. 

If I could address your earlier question—— 

Ms. SCHAKOWSKY. No. I have another question. Has your company met the legal requirement to use 70 percent of premiums collected in the individual market for the payment of medical claims? 

Ms. BRALY. Yes, we have submitted those filings and believe they 

are compliant with the requirement. You have to keep in mind that 

product is the product sold in a commercial market, that the losses 

that are incurred in the HIPAA and the Mistermet graduate program are borne in that marketplace as well. So in the end, the individual marketplace lost money in 2009, and would produce an 

after-tax return of 1.4 percent—— 

Ms. SCHAKOWSKY. So when you figure your profits, you don’t figure it across the company? You look just at the profits made or lost 

in the individual market? 

Ms. BRALY. Yes, and there are some very important reasons actuarially to make sure you price the product for the costs that are 

being incurred in those products. Cindy, you might talk about the 

potential—— 

Ms. SCHAKOWSKY. No, I don’t want to hear about it. 

Ms. BRALY [continuing]. Adverse—— 

Ms. SCHAKOWSKY. I don’t want to hear because it seems to me 

that when you have a company that is providing not widgets and 

not some luxury item but healthcare, that it might make sense to 

look across the whole company to see what kind of profits because 

people who are in the individual market are often least able to be 

able to come up with these very high rates. 

What would you think about an 80 or 85 percent medical loss 

ratio? 

Ms. BRALY. You know, our medical loss ratio as an enterprise is 

82.6 for 2009. And you know, one thing that is really important 

about the individual market, we in some states, where there has 

been regulation that really tries to restrict the ability to raise 

rates, all the competition has left. We are Blue Cross/Blue Shield. 

If you look at Maine, in 1993 there were 11 carriers in Maine offering products in the individual market. Now there is us and another 

company that is not a major national competitor because we are 

Blue Cross and we have geography licensure, and we don’t want 

to leave the individual market. And so we need to make sure that 

it is a viable marketplace for our customers so we can continue to 

cover their costs. So as they incur healthcare costs, we are there 

to provide and pay for those costs. 

Ms. SCHAKOWSKY. I yield back. 

Mr. STUPAK. Nothing to yield. Let me go to Mr. Welch of 

Vermont for questioning. 

Mr. WELCH. Thank you very much, Mr. Chairman. Ms. Braly, on 

our last panel we did hear from some Anthem policyholders who 

have had very high rate increases. Two of the policyholders had 

premiums that were being raised 38 percent. The third had a rate 

notification increase to 30 percent. All of those were markedly 

higher than the average increase that WellPoint has reported publicly. And the current rate increases put the policyholder in a tough 

position. They can drop insurance altogether or try to get a much 


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less comprehensive policy. And I would like to show you and Ms. 

Miller a document that suggests that these rate increases in fact 

could be much higher in the future. You can find this chart at Tab 

o7 of the document binder. And this, as you know, is a WellPoint 

internal analysis of the potential rate increases which was included 

as part of the individual leadership pricing memo, a document providing recommendations and analysis about the individual market 

in California. And I would like to put this document on the screen. 

Do we have that document up? 

[Slide] 

Mr. WELCH. OK. Thank you. Ms. Miller, as WellPoint’s Chief Actuary, I want to make certain I understand the three scenarios proposed by WellPoint officials in this document. Scenario one, and I 

don’t think this is on the screen, appears to propose that WellPoint 

make no change in SAFs or rate increase caps, right? 

Ms. MILLER. That is correct. 

Mr. WELCH. And then scenario two appears to propose a reduction in the rate caps by 2 percent after accounting for age. So am 

I reading that correctly? 

Ms. MILLER. Yes. 

Mr. WELCH. And then scenario three which is the focus of attention here, that is the chart that caught my attention. It appears to 

consider the possibility of removing rate increase caps altogether, 

and the document states, and I quote, ‘‘Remove SAFs completely.’’ 

And then below that header is a chart that shows that if WellPoint 

in fact implemented this program, taking away the rate caps, removing them entirely for certain plans, over 27,000 policyholders 

would be subject to a 228.4 percent increase in their monthly premiums. Is that right? 

Ms. MILLER. I don’t see the number of policyholders that you are 

referencing on the one that is in our book. But I do see the 228 

percent. 

Mr. WELCH. OK. So if we took the caps off, under your internal 

analysis, if I were a WellPoint policyholder subject to this situation, 

I could be receiving a 228 percent increase in my premium cost? 

Ms. MILLER. Yes, I would like to point out that these are labeled 

scenarios, not proposals. When we do our actuarial work, you start 

by looking at the rate increases that are necessary for—— 

Mr. WELCH. The scenario—— 

Ms. MILLER. It could have been the starting point, and it is 

meant to illustrate that if we didn’t cap, these would be the increases. We did in fact cap the rates. This was not a proposal. It 

was just in order to illustrate, you know, how dramatic some of the 

increases would be if we had to do that. 

Mr. WELCH. I get that. You are saying that if you had caps off, 

by your analysis, you might actually in order to maintain using Ms. 

Braly language, a viable marketplace would require you to raise 

my premium by 228 percent. That is where we are headed. I mean, 

this is the problem. That’s where we are headed. 

Do you consider, Ms. Braly, that it is a viable marketplace if a 

machine tool company who has got 15 workers that they have been 

loyal to and the workers have been loyal to them, and they are trying to hang onto the jobs and they are trying to hang onto health 


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benefits, they get a notice in the mail saying that they are going 

to get a 228 percent premium increase. Is that sustainable? 

Ms. BRALY. Absolutely not, which is why we need to focus on the 

rising health care costs, and we think we are an important part of 

that mechanism in healthcare. 

Mr. WELCH. Well, you know, that is pretty self-serving. I mean, 

if your medical loss ratio is you said about 82 percent, you know, 

just years ago the medical loss ratio was in the range of 95 percent. 

So there a business model that is working for you as an insurer 

so that you can pay your salaries, maintain your bottom line, but 

it is coming at great expense to other people. 

Ms. BRALY. Our administrative expense, you know, really does go 

to focus on disease management. We have 2500 nurses who work 

with our customers to make sure they are getting the benefits—— 

Mr. WELCH. You know, Ms. Braly, I don’t mean to interrupt. We 

have got a situation here that your own internal analysis suggest 

the obvious conclusion. It is not sustainable. I mean, if left to strict 

marketplace interpretation of what is ‘‘market viability’’, that being 

as I understand it, what you would have to charge in order to 

maintain the financial solvency of your business. If that requires 

charging that machine tool company 228 percent, that is not a market that is viable to anybody who is on the receiving end of that 

premium rate increase. So it suggests that the market model that 

we have is fundamentally broken. 

Ms. BRALY. We agree that we need a sustainable solution to this 

difficult problem, particularly in the individual market where we 

see these issues extremely in terms of the rate increases which is 

why we are an advocate—— 

Mr. WELCH. So basically you are in agreement with the proposition that I just made, that the current insurance model is fundamentally broken where the premiums are going up potentially 

228 percent? 

Ms. BRALY. I think we need to continue to create an opportunity 

for both consumers to be better purchasers of healthcare and understand the dynamics which we are doing through investment, as 

well as continue to innovate around how we fundamentally change 

the—— 

Mr. WELCH. When you say the consumer can be a better purchaser of healthcare, when you send out your premium notice, 

whether it is 40 percent or potentially 228 percent, and when someone calls, do you negotiate the rate for them? 

Ms. BRALY. We have a mechanism where we do work with our 

customers to make sure that they can get another product potentially that they can afford or that has benefits that they want or 

need or not the benefits that they don’t want—— 

Mr. WELCH. How can you—literally, I mean, again, I am not—— 

Mr. STUPAK. Go ahead, finish it up, and then that is going to be 

it. 

Mr. WELCH. Well, I think the point has been made here. Thank 

you, Mr. Chairman. 

Mr. STUPAK. Thank you, Mr. Welch. Ms. Capps for questions, 

please? Thank you for being here today, too. 

Mrs. CAPPS. Thank you, Mr. Chairman, it is an honor to be with 

your Subcommittee. I see a couple of the members of the previous 


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panel. Before I address the current panel, I just want to say thank 

you for being such wonderful witnesses. You spoke for a lot of my 

constituents. I represent a district on the central coast of California, and their stories are so similar to yours, and they were very 

eloquent. I had to leave, and so I wasn’t able to say that to you 

and allow you to expound even more. 

But to this panel, listening to a couple of my colleagues and your 

responses too them just makes the case for me as one member of 

Congress that we really do need a lot more competition within the 

health insurance market. 

Here is a story from one of my constituents, in a quote. ‘‘We as 

many others have received a notice from Anthem that our health 

insurance premium will increase by 30 percent starting March 1. 

My husband and I are both self-employed. We currently afford a 

PPO with a 5 deductible. And now Anthem, being so understanding, is offering a $7,500 deductible. If anything serious happens to our health, we lose everything to pay our medical bills, 

even though we technically have insurance.’’ Here is another constituent. ‘‘I am a 61-year-old male with individual health insurance 

from Anthem Blue Cross. I just received a notice of a rate increase 

from $616 a month to $881 a month.’’ Another says this. ‘‘The premium on my Anthem Blue Cross health insurance policy is going 

up from $545 per month to $712 as of March 1. I want you to be 

aware,’’ she writes to me, ‘‘of this 30 percent hike in insurance 

rates. 

Ms. Braly, these are hardworking people, I know, who have no 

choice but to purchase health insurance on the individual market. 

Yet it doesn’t seem like they get much for it. You claim you must 

raise prices in order to make up for healthy people who drop out 

of the system. But isn’t it true that you have long engaged in the 

practice of rescission? I am well aware that Anthem has been fined 

for doing that in years past. And knowing that it may well drop 

me as a consumer who, in the even that I would become sick, is 

certainly not an attractive enticement for me to help as a healthy 

customer to join forces so that you can help to keep your costs 

down. You don’t market yourselves very well. At a time when your 

company is bringing in record profits, but when the rest of our 

economy is suffering, I want to know what steps you are going to 

take now to make quality health insurance products affordable to 

the people like my constituents who want to be responsible and 

want to purchase health insurance but just can’t do that. Do you 

want to respond quickly? I have another—— 

Ms. BRALY. I would. Thank you. Thank you for the opportunity 

to talk about what we are doing to try to make healthcare premiums more affordable. For example, when we negotiate with hospitals in California, our goal is to have zero increases. Often those 

hospitals come to us requesting a 40-percent increase, and if there 

is not competition among hospitals, the regulars have said that it 

is inappropriate for us to terminate those hospitals from our network because then we would have an access problem. So as a result, we don’t have the ability to, you know, not agree to those very 

high rate increases form the hospitals. So we are going to continue 

to fight on behalf of our customers to make sure that the 

healthcare they are receiving is affordable and high quality. And 


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it is a difficult fight. It is one that we keep doing. It is why we sold 

our pharmacy benefit management company so we could get access 

to lower cost drugs because those costs are driving the overall increase in—— 

Mrs. CAPPS. So you are shifting the blame to the hospitals pretty 

much. Just summarizing. 

Ms. BRALY. We are working together to make sure we can address that. 

Mrs. CAPPS. There is nothing within your own system that you 

can find any flaws with. 

Ms. BRALY. We continue to work on our efficiency. In fact, if you 

look at our administrative efficiency ratio, we continue to improve 

our efficiency as an organization, while we provide more services 

in terms of getting to that underlying healthcare cost. We will continue to do that. 

Mrs. CAPPS. I am going to just again address the topic that has 

come up. I saw slides shown of the places where you hold your retreats. This is a sticking point. It is not the whole story, but it is 

one that because it is so visible, it is pretty galling for people who 

have had to sacrifice their vacations now for the past two or three 

years because of the economy and what it is doing to their personal 

lives. And yet—and I am going to finish and then I am going to 

give you the rest of the time to respond. You have continued to 

make these retreats a part of your working relationship and offering these to your employees. Consumers are making sacrifices in 

order to hold onto their health insurance as the premiums go up 

and then as they face being denied. These retreats hold more sway 

with your company than the health and well-being of your subscribers, and I will allow you any seconds I have left to—— 

Ms. BRALY. Yes, those meetings have been characterized as retreats for our associates, and that is incorrect. Those meetings that 

were described are meetings that we have with our customers, 

meetings—— 

Mrs. CAPPS. Which customers? 

Ms. BRALY. Often I meet quarterly with representatives for our 

customers, our customer advisory groups and—— 

Mrs. CAPPS. Who are those people? 

Ms. BRALY. They are representatives from our customers, so 

business people who buy the benefits on behalf of group customers—— 

Mrs. CAPPS. So you are selling your benefits at those lavish resorts? 

Ms. BRALY. We are meeting with—brokers and agents. You heard 

one of the panelists say she was going to work with her agent to 

understand what her options are. 

Mrs. CAPPS. Well, that is where her agent was when she was trying to get a hold of her. 

Ms. BRALY. We make sure that our agents and brokers consultants and customers know what our benefits are, know what plans 

and services we can provide to them. We do some—— 

Mrs. CAPPS. And you justified that cost as you are raising the 

premiums? 

Ms. BRALY. No, we continue to focus on making sure we are more 

efficient. We do need to meet with people that are agents, brokers 


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and customers. We find that they provide input to us in terms of 

how we improve the services and benefits that we provide to—in 

the case of—— 

Mrs. CAPPS. Do you ever meet with your premium holders? Do 

you ever talk with them? 

Ms. BRALY. I do, and I am delighted to, and I appreciate the opportunity when I get. And yes, I—— 

Mrs. CAPPS. Did you hear their stories in addition to the stories 

you heard this morning? 

Ms. BRALY. It is a challenge, believe me. We are on their side. 

We want to—— 

Mrs. CAPPS. They don’t feel like it. 

Ms. BRALY. And we want them to understand there is so much 

misinformation about what is driving these premium increases. 

And I think it is important for people to understand the margins 

that are available to pharmaceutical companies and in hospitals 

and where we stand on a relative basis because we are fighting 

every day to make sure we can make their health benefits more afford able. 

Mrs. CAPPS. Thank you, Mr. Chairman. 

Mr. STUPAK. Thank you. There was a request earlier that a letter 

dated February 11, 2010, from Anna Eshoo, member of this Committee and Member of Congress, to Ms. Braly be entered in record. 

Without objection, it will be entered. 

Second round of questions, Mr. Waxman. 

Mr. WAXMAN. Thank you, Mr. Chairman. You have said a couple 

of times, you want to make healthcare services for your beneficiaries. You want to provide more services for them. You want to 

provide more efficient services for them. You want to provide good 

services for them. Is that what you have been saying? 

Ms. BRALY. Yes. 

Mr. WAXMAN. You see that as your role? 

Ms. BRALY. We see it as a critical role, for us to get them access 

to affordable quality healthcare. And we, by providing services that 

we do, we think that creates real value for the customer. 

Mr. WAXMAN. Well, some of these documents paint a different 

picture. There is a document that is titled WellPoint individual 

2010 plan. Opportunities not reflected in the forecast. It is a business plan, and under this business plan there is a section called 

risk management, and it says, our medical loss ratios should improve as we eliminate subsidies and other risk management initiatives. And then you have a number of initiatives. One of the issues 

is to take preexisting waiting periods and adjust them to be either 

12 months or the legal maximum if less. So you want to make 

sure—they have to wait, if they wait they have a preexisting condition, to wait as long as the maximum will allow. Secondly, reinstatements will only be allowed for a period of 60 days after termination and will require underwriting and payment of back premiums. So that is going to make it more difficult for people to get 

back into getting access to this good quality care. 

Does WellPoint have initiatives to reduce the amount of premium 

dollars that are used to pay for medical claims? 

Ms. BRALY. We have a number of initiatives to try to reduce medical costs, period. And then—— 


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Mr. WAXMAN. Well, how about reduce, not just medical costs, but 

medical services? 

Ms. BRALY. We want to make sure that our members get access 

to the quality care they need at the right setting at the right time. 

So if we are avoiding a fraudulent expense or an unnecessary expense, yes, we want to—— 

Mr. WAXMAN. Well, not fraudulent or unnecessary. You are saying that people have preexisting conditions. You are going to make 

them wait as long as possible before they can get care and—— 

Ms. BRALY. No, I was talking—— 

Mr. WAXMAN [continuing]. There is another document, let me put 

it up on the screen. It is Tab 14. 

[Slide] 

Mr. WAXMAN. In this document, WellPoint executives identified 

key issues confronting the individual market, and they stated, lack 

of attention to risk management, decreased ability to use preexisting claim denials and rescind policies and maternity policy 

have led to our first-year loss ratios climbing from less than 50 percent 5 years ago to over 65 percent. So these documents seem to 

indicate that senior executives are actively considering steps to reduce the amount of premium benefits that are used to pay for medical claims. If you are going to reduce payment for claims, you are 

reducing payment for claims for legitimate medical services. 

Ms. MILLER. We are trying to make sure that the pool of members that we have is not disadvantaged in the marketplace. One of 

the reasons that our rates are going up so much in 2010 is that 

healthy people are making a choice when faced with the hardship 

of the premium increases they are seeing. We recognize that there 

are hardships—— 

Mr. WAXMAN. What does a medical loss ratio mean? 

Ms. MILLER. What is medical loss ratio? 

Mr. WAXMAN. Yes, what does that mean? 

Ms. MILLER. It is the claims, the medical claims paid, divided by 

the premium. 

Mr. WAXMAN. So you are trying to reduce the amount of claims 

you will pay for people in order to make sure that you are still 

within the medical loss ratio but you can reduce the claims for people, isn’t that right? 

Ms. MILLER. No, you can’t reduce claims without changing your 

medical loss ratio. That is not possible. 

Mr. WAXMAN. OK. Well, if you are looking for ways in a business 

strategy to manage the risks, they all sound very nice, managing 

the risk. And then the ways you do that is to deny people access 

to care so you don’t have to pay for that care for a longer period 

of time. That sounds like you want to make sure that you have got 

less money going into paying for care. 

Ms. MILLER. No, specifically in the individual market in California, there is a minimum loss ratio requirement that we comply 

with. In fact, in the HIPAA guarantee issue products that we described, the medical loss ratios or medical cost ratios exceed by far 

the premium increases that we can—— 

Mr. WAXMAN. The reason that you have a medical loss ratio is 

we want to guarantee that insurance companies are using premium 


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dollars to pay for medical care for the customers and not for overhead, corporate expenses, and profits. 

Ms. MILLER. Which is why our—— 

Mr. WAXMAN. You have to balance that out. But it sounds like 

your people were looking at business strategies to reduce the 

amount of payment of the premium dollars for the medical care for 

the customers. 

Ms. BRALY. Actually, if we take some of those risk management 

ideas, we can potentially reduce the cost for the overall pool and 

therefore not have such significant—— 

Mr. WAXMAN. But for the individual involved, that individual is 

not going to have access to more efficient care. They are not going 

to have access to good services, they are not going to have access 

at all because you are going to hold down the cost for the overall 

pool. But that individual is going to have to go without or pay for 

the services that you wouldn’t otherwise pay for. 

Ms. BRALY. And that is one of the critical elements about our reform. If an individual doesn’t buy his or her policy when they are 

well and there is an underwritten market, then if we allow them, 

like we do in some markets where we have guarantee issue, like 

New York and Maine, to wait until they are sick to buy the policy, 

then they won’t buy the policy—— 

Mr. WAXMAN. Nobody wants to do that—— 

Ms. BRALY [continuing]. Until they are sick. 

Mr. WAXMAN [continuing]. But you have got people covered, and 

your business—and you can’t drop them because the law won’t let 

you drop them. 

Ms. BRALY. That is correct, and we don’t want to. 

Mr. WAXMAN. So you have got people covered, and then you want 

to shift more costs onto them and use more of the premiums for 

overhead instead of for services. What I think we need is meaningful health reform to guarantee that the insurance companies are 

using premium dollars to pay for medical care for the customers 

and not for the overhead, corporate expenses and profits. What is 

the bill, what do we have? We have 80 percent requirement that 

the money collected by premiums be used to pay for health insurance claims. 

Ms. BRALY. Right. 

Mr. WAXMAN. You are at 85 percent. You don’t do that now, do 

you? 

Ms. BRALY. We are at 82.6 percent. I want to address that question, though, too. You know, every administrative dollar that we 

spend, we want to produce a lower cost of care as a result of that. 

So we make investments in things like—— 

Mr. WAXMAN. You don’t produce a lower cost of care, you produce 

a certain amount of—to meet the ratio, a certain amount to make 

sure that you are meeting your expenses and your profits. But people are being denied care, and that is why I think health insurance 

reform is so necessary, and I dispute your statement, although I 

don’t have time to go into it, that this bill does not bring more people into the pool. And individual has no power to deal with you, 

but if they are pooled together with others, then those people have 

the opportunity under healthcare legislation to say we want to 

make sure that 85 percent of the money that you collect from us 


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pays our healthcare claims, not more money going to retreats and 

expenses and salaries. We want it for that purpose, and then you 

can spread the costs out. Thank you, Mr. Chairman. 

Mr. STUPAK. Mr. Burgess for questions, please. 

Mr. BURGESS. Thank you. Let me just clarify. On the AMA, 

American Medical Association site last night, and of course they 

are not your biggest ally or fan, but they reported a medical loss 

ratio for WellPoint at 84.8 percent which is right at that 85 percent 

figure that was mandated in the bill. Is that for the whole company 

and it is different in California? 

Ms. BRALY. They may be looking at statutory financial statements versus gap. The gap statements show for year-end. We were 

at 82.6 which is enterprise-wide. So I am not sure exactly where 

they are at 84.8, but there are many products in which—— 

Mr. BURGESS. They Tweeted it, so I know it is right. 

Ms. BRALY. Right. 

Mr. BURGESS. Let me ask you a question. I thought Blue Cross 

was non-profit. We have all this discussion of profits today, I always thought when I was in practice that Blue Cross was a nonprofit. 

Ms. BRALY. There are many companies who have Blue Cross licenses. We are a for-profit company, but as we have described, the 

not-for-profit companies continue to have margins sometimes in excess of ours because we have come together as former Blue Cross 

independent states, and we have created a lot of efficiency and 

scale at WellPoint. So we are a more efficient Blue Cross plan but 

we are for-profit Blue Cross plan. 

Mr. BURGESS. One of the areas, and I am sorry Mr. Waxman is 

gone, but one of the areas where I disagree with Mr. Waxman but 

you agree with him is that we need a mandate, an enforceable 

mandate, a rigid mandate in this healthcare bill. Mandates are an 

anathema in a free society, and my submission is that they do not 

work. We have a tremendous mandate right now with the IRS. Everybody knows you have got to pay your income taxes, and if you 

don’t, you may not be exactly sure of the penalties but you know 

it is bad and you don’t want to find out. And our compliance with 

the IRS is about 85 percent. Well, we have 15 percent of the people 

uninsured in a voluntary system in this country, so I don’t know 

how much more compliance we get by going to a mandate, and yet 

we ask honest people to give up significant freedoms. When we did 

the Medicare Part D program several years ago, and part of my job 

as a member of Congress was to go out and talk to people about 

the changes coming to Medicare, and I can’t tell you the number 

of people who would tell me that you can’t make me take that prescription drug benefit. No, ma’am, I am not here to make you take 

it, it is there for you if you want it. Well, you can’t make me take 

it. I said, no, that is right. You can do what you are doing right 

now, and that is oK. You can’t make me take it. Well, what are you 

doing right now? Well, I don’t have drug coverage. You can keep 

it. You can keep that non-coverage as long as you want. Now, there 

was a penalty involved, and we got a lot of criticism for that, that 

if you didn’t sign up in the open enrollment period which at that 

point was six months after the initiation, that people would pay a 

10-percent premium for coming into the system if you will after 


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they got sick because we were trying to make the benefit look more 

like insurance and less like an entitlement. And you know, the 

story with Medicare Part D, although it is not perfect is that it has 

provided a benefit now to 92 or 93 percent of seniors have a credible prescription drug coverage of some sort and 92 or 93 percent 

are satisfied or very satisfied. So that is a pretty good track record. 

Now, we did that without a mandate, and the model that we 

should follow, in my opinion, is that model which is to create programs people want. If you get a mandate, which is a program you 

want, but if you get a mandate, then there is not reason for you 

to try to compete for any of these subscribers’ business. And yet, 

how much better would it be if you said, well, we are going to create programs that people want and will want to stay with us over 

time. I wish I could have a longitudinal relationship with my 

health insurance company. I have with my car insurance company 

since I was 18 years old, but health insurance, you shop around 

every year to get the best deal when you are in small business or 

your employer shops around for the best deal, and as a consequence, you don’t get to keep your insurer over time. One of the 

reasons I went with a high deductible policy so I could have a longitudinal relationship with my insurance company. We are far better off if we construct programs that people want, rather than telling them what they have to have. 

Now, you have got, and I think it has already come up, that increases in the California individual market can be as much as 106 

percent under the confines of the House-passed bill, and that is a 

pretty significant figure. Now, Mr. Stupak is correct, none of the 

benefits start for 4 years, so it might not happen to you right away 

but at some point, the cost of those benefits is going to go up, and 

the truth is, no one really knows because we do these budget scores 

but no one really knows. Look how far off the mark we were when 

we passed Medicare in 1965 with what it costs us today. And Mr. 

Waxman talks about your medical loss ratio, look at our unfunded 

liability in Medicare and Medicaid. I mean, that is what is staring 

people in the face. Yes, we got a lot of problems here we need to 

fix. They are complex problems that are really hard to do. We need 

to do them. We have got a much bigger problem staring us in the 

face which is the unfunded obligation that we have with our existing public options if you will that those bills are going to come due 

before any of us really had planned. That is really where we need 

to be focusing right now. We are not doing our part very well right 

now with Medicare and Medicaid. Before 50 percent of the market 

that we pay for right now, we are asking to go to 75 percent at the 

federal level. That is a big ask for the American people. That is 

why we are getting so much pushback on this bill. They don’t think 

we are doing a good job with what we have got now, and they don’t 

want to give us another 25 percent of that market. 

Thank you, Mr. Chairman. I will yield back. 

Mr. STUPAK. Thank you, Mr. Burgess. Let me just sort of wrap 

up a couple questions if I may. Ms. Braly, you indicated that the 

drivers for this increase, the 39 percent increase you are seeking, 

doctors were 6 percent, hospital was 4 percent I think you said, 

and pharmaceutical, 13 percent, right? 


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Ms. BRALY. No, hospital trend is about 10 percent, the physician 

trend is 6 and the pharmaceutical trend is about 13 for California 

for the 2010 rates. 

Mr. STUPAK. OK, so that is about 29 percent. So does that leave 

10 percent then for administrative costs? 

Ms. BRALY. No, Cindy can take you through the different elements that went into the price increases. 

Mr. STUPAK. No, I am just trying to keep this simple so average 

lay people like me can understand how you come up with 39 percent if your projected, and these are all projected, right, Doctor, 6 

percent you said, hospital 10 percent, pharmaceutical 13. What is 

the other driver then? 

Ms. BRALY. The trend, I am describing the trend in each of those 

elements. 

Mr. STUPAK. OK. So your 39 percent, you are looking for sort of 

a guesstimation what you are going to need? 

Ms. BRALY. No, Cindy can give you more detail in terms of exactly how we got to the 39 percent because you have rising 

healthcare costs. You also have what we call adverse selection—— 

Mr. STUPAK. Well, wait a minute. 

Ms. BRALY [continuing]. Due to the fact that a lot of the—— 

Mr. STUPAK. Ms. Miller has submitted for the record, but what 

is the driver then, doctor, pharmaceutical, hospital. What else? 

Ms. BRALY. Correct. We are also having adverse selection meaning the healthy people and their premium is going away. 

Mr. STUPAK. How many healthy people did you have last year in 

your individual policies? 

Ms. BRALY. You know, we look at the whole pool—— 

Mr. STUPAK. No, just how many people did you have? 

Ms. BRALY. We had 800,000 members. 

Mr. STUPAK. How many did you have this year in your individual? 

Ms. BRALY. You know, we were expecting 25,000 on the aggregate basis between the two regulated companies less that we will 

have about 25,000. 

Mr. STUPAK. OK, but the individual policy, how many less are 

you going to have? 

Ms. BRALY. About 25,000 less we think, we are projecting. 

Mr. STUPAK. OK. 

Ms. BRALY. What happens in the individual product—— 

Mr. STUPAK. No, I understand. 

Ms. BRALY [continuing]. People are likely to come in and out because they go into group policies. 

Mr. STUPAK. And because they can’t afford it. 

Ms. BRALY. Pardon? 

Mr. STUPAK. And because they can’t afford it. A lot of people in 

this country every year go bare because they just can’t afford it—— 

Ms. BRALY. Which is a loss—— 

Mr. STUPAK [continuing]. Whether they are in a group, they get 

unemployed or whatever it might be. 

Ms. BRALY. We want to have that customer and we want that 

customer to have coverage. 


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Mr. STUPAK. OK. You indicated earlier for 2009 your corporate 

profits were 2.3, almost 2.4 billion because you sold a management 

company, right? 

Ms. BRALY. Well, we sold a PBM, and we had operating earnings 

as well. 

Mr. STUPAK. OK. What was your company profit then in 2008? 

Ms. BRALY. Our profit margin was 4.8 percent on a relatively 

similar base. So actually, you know, the margin was—well, 4.6 in 

’08, 4.8 is our overall margin in 2009. 

Mr. STUPAK. So that is about the same as 2009 then? So what 

would that be in dollar signs then in 2008? 

Ms. BRALY. I am not sure exactly what. We probably had $62 billion worth of revenue total. So not a dissimilar number. 

Mr. STUPAK. So under 2.4? 

Ms. BRALY. We can get you the exact—— 

Mr. STUPAK. So 2010 then, you anticipate again you are going to 

be around $15 billion? 

Ms. BRALY. $15 billion? I’m sorry. 

Mr. STUPAK. Yes, isn’t that what you said? 

Ms. BRALY. No. 

Mr. STUPAK. OK. Go ahead. 

Ms. BRALY. No, in 2010—— 

Mr. STUPAK. 2010, where do you think you are going to be profit 

wise? 

Ms. BRALY. We are actually going to have lower operating earnings in 2010. It is a reflection of the economy and the loss of our 

membership primarily inMr. STUPAK. But your profit will probably be what, 4.8 percent? 

Ms. BRALY. We expect it to be in the same range potentially, yes. 

Mr. STUPAK. So you are already expecting at least for the last 3 

years, your profit will be the same? 

Ms. BRALY. It has been pretty steady in that range, 4.6, 4.8 

would be appropriate, which on a relative basis, the other parts of 

healthcare and many other industries is very modest. 

Mr. STUPAK. Well, you may think it is modest, but if you are 

looking at a 39 percent increase or in Michigan when they proposed 

56 percent increase, that is not very modest to folks. 

Ms. BRALY. Yes, we are not Blue Cross/Blue Shield of Michigan. 

Mr. STUPAK. I know you are not. I know you are not, but Michigan Blue Cross/Blue Shield is a non-profit, you are a non-profit. 

Ms. BRALY. No, we are for-profit. 

Mr. STUPAK. You are a for-profit. I am sorry. You are in Maine, 

though, right, you said? And they have had double-digit increase. 

You mentioned earlier about Maine being one of the dominant 

players. 

Ms. BRALY. Maine is one of the places where we are one of the 

few players left in the individual market because others have left 

the market. 

Mr. STUPAK. Right, and less players in the market, the easier to 

manipulate that market just because—— 

Ms. BRALY. No, in fact—— 

Mr. STUPAK [continuing]. Of your sheer size. 

Ms. BRALY. No, in fact what has happened is because the regulatory environment in Maine and particularly in the individual 


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market was regulated the way it was, everyone left except for us. 

We are a Blue Cross. We are not going to leave. We are going to 

stay in our geography and continue to serve our members. 

Mr. STUPAK. Well, you know, is expected to be 23 percent this 

year, right? 

Ms. BRALY. We filed for a rate increase in Maine. The Maine regulator has denied that, and we are in litigation with the Main regulators about the ability, as provided in the statute, to have an appropriate margin. 

Mr. STUPAK. Well, how about in Maine, is your doctor costs there 

6 percent or is it less in Maine? 

Ms. BRALY. In Maine, the doctor costs are very high, and on a 

relative basis compared to other parts of the country, it is one of 

the most highly—— 

Mr. STUPAK. Yes, but is it 6 percent like California? I’m looking 

for your drivers in Maine. 

Ms. BRALY. No, in fact we have a—— 

Mr. STUPAK. You have your drivers in California which you said 

was doctors was 6 percent, hospital, 10 percent—— 

Ms. MILLER. The driver—— 

Mr. STUPAK [continuing]. Pharmaceutical 13—— 

Ms. MILLER. I can take that question, Mr. Chairman. 

Mr. STUPAK [continuing]. That is 29. 

Ms. MILLER. The driver—— 

Mr. STUPAK. And so in Maine, what is it there? 

Ms. MILLER. Off the top of my head, I don’t know the exact 

trends in Maine. The driver in Maine is that it is guaranteed issue, 

and there is no requirement for people—— 

Mr. STUPAK. Well, guaranteed issue—— 

Ms. MILLER. The people wait until they are sick to purchase coverage, and it drives up the cost of care. Maine has one of the highest healthcare costs in the country. 

Mr. STUPAK. Guaranteed issue is you are guaranteed to present 

the policy and then it is up to the consumer whether or not they 

can afford it. We call it purging in the business world—— 

Ms. MILLER. Absolutely, and what happens then—— 

Mr. STUPAK [continuing]. And in the individual market it is rescission. 

Ms. MILLER. Only people who know they are going to incur 

healthcare costs more than the premium buy the policy, and that 

is not a sustainable business model. And that is why all the other 

insurers left the state because they were forced to lose money in 

that business. 

Mr. STUPAK. That is not what the last panel said. They don’t 

take insurance because they expect to gain more than what they 

paid. In fact, our last—— 

Ms. MILLER. No—— 

Mr. STUPAK [continuing]. Panel, they basically pay and never 

really access it because you have such high deductibles and co-pays 

and everything else. 

Ms. MILLER. Well, obviously there are people who are using the 

coverage because otherwise, our medical loss ratio would be zero. 

I mean, that is insurance. You buy it when you don’t need it so 

that it will be there when you do need it, and if everybody waits 


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until they need it to buy it, we result in the situation that we have 

today in the individual marketplace where we have escalating insurance costs, which is again why we have talked about the fact 

that we need sustainable healthcare reform. We need to address 

not just the insurance market reforms which we agree need to 

occur, but you also have to address the underlying cost of care. We 

are only charging the costs that come through to us. 

Mr. STUPAK. Well, I still don’t see how you justify 39 percent. I 

got up to 29 percent in your drivers and your trend—— 

Ms. MILLER. Thirty-nine percent was the high. The average was 

25. 

Mr. STUPAK. Right. 

Ms. BRALY. And Cindy, do you want to talk about each element—— 

Mr. STUPAK. It is amazing. We had three witnesses say they are 

all at 39 percent. But you are saying the average—— 

Ms. MILLER. I don’t know how the panelists were selected, and 

again, we don’t like raising our rates that much. We know it is a 

hardship on these people, but at the end of the day, if you—— 

Mr. STUPAK. Do you believe that you can actually raise your 

rates where no one is going to want to take your policy anymore? 

Ms. MILLER. Pardon? 

Mr. STUPAK. Do you think you are going to finally get to the 

point where basically you are killing the goose that laid the golden 

egg? No one is going to be able to afford you? 

Ms. BRALY. You know it is really an issue that we have got to 

get to the underlying costs of care because we want access to 

healthcare. There are wonderful advances, wonderful technologies, 

and we want to make sure that we continue to have access and our 

customers continue to have access, and it needs to be affordable. 

And so we have to think about how—— 

Mr. STUPAK. Do you believe there is going to be a point where 

we can no longer afford it, individually? 

Ms. BRALY. I think we as human beings greatly value our access 

to healthcare which is why we continue. 

Mr. STUPAK. I agree, and every family has to make a value judgment. Can I afford it today or not? So when my rates go up 39 percent, as our first panel said, we look at it and pretty soon it is 

going to be, can I afford it anymore or do I just drop it and hope 

I don’t get sick? 

Ms. BRALY. Which is why we are in the market saying we have 

to get to reducing healthcare costs, making sure people aren’t getting unnecessary procedures or redundant procedures. We play 

that important role in healthcare. To eliminate us from the process 

eliminates the opportunity to get to that value equation. Without 

us—— 

Mr. STUPAK. I don’t disagree with you, but for the average family, when they are sitting there and they are saying my rates just 

went up 39 percent or if you want to use your words, the average 

in your case, 25 percent, and man, I can’t afford it anymore, it is 

as much as my house payment as the first panel said, and then I 

look at the end of the year and darn it, you made $2.358 billion 

and the salaries are in millions of dollars for the executives, how 


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can I sustain that because I am the one who paid it, not them. And 

you are getting to the point where no one can afford it. 

Ms. BRALY. And we are serving 34 million Americans across the 

country, and our goal and desire is to try to get for them affordable 

health benefits that they can continue to access, the quality care, 

the drugs that they need and want—— 

Mr. STUPAK. And it is not working when I came to Congress, like 

our first panel, small businesspeople, 64 percent of people had 

health insurance, would buy it. Now we are down to about 34 percent. That is why we have to do something on healthcare in this 

country because the cost is killing us. 

Ms. BRALY. And that is why we—— 

Mr. STUPAK. And we are just going way over and arguing and 

probably getting outside the scope of this hearing. 

Mr. BURGESS. Mr. Chairman, may I ask one last question of our 

witness? 

Mr. STUPAK. Sure. 

Mr. BURGESS. We have a vote in a few minutes on repeal of 

McCarren-Ferguson. Do you have an opinion as to whether or not 

that is going to bring down healthcare costs? 

Ms. BRALY. You know, belief is it is not going to affect healthcare 

costs one way or another. 

Mr. BURGESS. Is it going to affect your business? Is there any 

good reason not to do it? 

Ms. BRALY. The unintended consequence that we worry about for 

the McCarren-Ferguson repeal is that there are initiatives to share 

data, with the evolution of health IT in particular. If we can address some of the quality opportunities through the sharing of 

data, we hate for those to be eliminated as part of this process. 

Mr. BURGESS. But that would be true in anything, infection control ideas. Identifying and aggregating data is going to be critical 

in that. 

Ms. BRALY. Exactly, and that is why as health IT advances and 

we are investing in that to make sure we can use that data as 

meaningful information, we would hate for that to be eliminated as 

an unintended consequence of that repeal. 

Mr. BURGESS. What about professional baseball? Would there be 

any unintended consequences to—— 

Ms. BRALY. No consequence to us. 

Mr. STUPAK. That is the Curt Flood case. You don’t even want 

to go there. With that, let me conclude this panel and thank you 

both for being here and thank you for your testimony today. 

Ms. BRALY. Thank you. 

Ms. MILLER. Thank you. 

Mr. STUPAK. That concludes all questioning. I want to thank all 

of our witnesses for coming today and for their testimony. The 

Committee rules provide that members have 10 days to submit additional questions for the record. I ask unanimous consent that the 

contents of our document binder be entered in the record, provided 

the Committee staff may redact any information that is business 

proprietary, relates to privacy concerns, or is law enforcement sensitive. Without objection, our document binder will be entered into 

the record. 


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Also, I ask unanimous consent, the letter from Mr. Dingell to the 

National Association of Insurance Commissioners and their response dated February 17, 2007, be submitted as part of the record. 

Without objection, documents will be entered in the record for Mr. 

Dingell. 

[The information appears at the conclusion of the hearing.] 

Mr. STUPAK. That concludes our hearing. This meeting of the 

Subcommittee is adjourned. Thank you all again. 

[Whereupon, at 2:12 p.m., the Subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 


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Statement of 

The Honorable John D. Dingell 

Subcommittee on Oversight and Investigation Hearing on 

"Premium Increases by Anthem Blue Cross in the 

Individual Health Market" 

February 24, 2010 

Mr. Chairman, thank you for holding this critically important oversight 

hearing today. I am very concerned about Anthem Blue Cross's proposed rate 

increases in their individual policy market, in some cases up to 39 percent. If 

the rate increase goes into effect in May, enrollees will have to face a set of 

unconscionable choices: pay dramatically higher prices; switch to another 

policy that costs less, but probably does not cover the services they need; or 

drop coverage all together. 

I am particularly looking forward to the testimony of the first panel of 

policy holders. Their stories are ones that will become all too familiar around 

the country if we do not press forward with comprehensive health care 

reform. 

In fact, already the Anthem Blue Cross of California rate increase is 

not an isolated event. Just last week Health and Human Services Secretary 

Kathleen Sebelius released a report that shows similar rate increases in at 

least half-dozen other states. 

The insurance industry, including the two panelists today, and those 

that defend them, say these rates are justifiable. There are those who blame 

the recession and regulation and try to paint these insurers as overburdened 
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good Samaritans promoting free enterprise while protecting the public's 

health and well-being. 

Let's take a closer look at some of these assertions. Yes, we are in the 

midst of one of the worst recession since the Great Depression. However, 

Anthem Blue Cross of California had similar double-digit increases in 2005, 

well before the economy started to weaken. As premiums increased during 

the last decade, the generosity of these plans decreased, meaning people were 

paying more for less coverage. 

Equally alarming, is the fact that the five largest for-profit insurers, 

including Wellpoint, the parent company of Anthem Blue Cross, earned 

$12.2 billion last year. It was their most profitable year ever. There aren't 

many other American businesses who can say the same thing about their 

2009 profits. 

Many people, our Republican colleagues in particular, say that these 

increases are a symptom of over regulation. Yet, according to a February 18 

Time Magazine article, "despite the fact that the state has some of the 

strongest consumer-protection laws in the country, California's regulations 

regarding the individual health insurance market are not very strict." 

Insurance companies in California do not have to seek the permission of the 

state's insurance commissioner to increase rates, and they only have to spend 

70 percent of their premiums on claims. 

In preparation for this hearing, I sent a letter to the National 

Association ofInsurance Commissioners with questions about rate increases 

across the country, their causes, and the authorities each state has to prevent 
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them. What they highlight is an array of state policies, some that do a decent 

job of protecting consumers and others that practically give the insurance 

industry complete free reign. In their letter, NAIC also points out the benefit 

comprehensive health reform would provide with issues like the one we are 

here to discuss this morning. I would like to ask that my letter and the 

NAICs response be submitted for the record. 

This is further example of why we must pass comprehensive health 

care reform legislation this year. The Democratic health care reform 

proposals would immediately put the brakes on these rate increases. For 

example, the President's proposed Health Insurance Rate Authority will 

provide assistance to states to help them review unreasonable rate increases. 

The new health insurance exchanges will create competition among the few 

insurers who dominate the marketplace, and finally, there will be an end to 

discrimination based on pre-existing conditions and arbitrary limits on 

coverage. 

Those defending the companies just gloss over the lack of competition, 

the failure to contain costs, the obscene rate hike requests that exceed the rise 

of medical inflation - all standard business operations for insurers. 

Without health care reform that protects the American people's hardearned money from simply adding to record profits and covering 

astronomical overhead costs, the companies will continue to conduct business 

as usual - hiking premiums and shrinking benefits. 

Thank you, Mr. Chairman. I yield back the balance of my time. 
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Energy and Commerce Hearing 

Premium Increases by Anthem Blue Cross in the Individual 

Health Insurance Market 

I Opening Statement from Congressman Baron Hill 

• I would like to thank the Chairman for organizing this hearing. 

• This is certainly a timely and topical subject. 

• While the focus of this particular hearing is centered upon rate increases in 

California, I would like to point out that thousands of Hoosiers, including many 

of my constituents, have Well Point insurance and would be directly affected by 

rate increases. 

• I know the Chairman is aware of a letter sent by some of my colleagues in the 

Indiana State government asking that my home state be included in this 

investigation and hearing. 

• I would like to reiterate that call and hope we can have another meeting of this 

body regarding proposed rate hikes in Indiana at a later date. 

• I, like many, was very taken aback by Well Point Inco's announcement that the 

company plans to increase premiums by as much as thirty-nine percent on 

some Hoosiers. 

• Thirty-nine percent. I'd like that to sink in for a second as I'm not entirely sure 

these CEOs know what a thirty-nine percent increase means for Hoosier 

families. 

• It means a lot of them will have to drop the insurance they've dutifully paid into 

for years. 

• It means a lot of them will have to go without necessary medical care. 

• It means an added stressor onto already-maxed out family budgets. 
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• All this, while Well Point racked up a $2.7 billion profit in fourth quarter 2009. 

• I would ask that the representatives from WeliPoint appearing before us today 

please explain directly to my constituents in Southern Indiana why their insurer 

who pulled in nearly $3 billion in profits in a single quarter last year are 

increasing premiums. Could you help me with that explanation please? 

• In closing, I realize Well Point is now reviewing the proposed changes in 

premiums, and I would ask that they abandon that plan entirely. 

• With that, I understand that Well Point has cited a weak economy as the reason 

for the rate hikes. 

• I would ask the executives to consider why that same factor - a weak economy 

- would spell disaster for Hoosier policyholders who could see their premiums 

increase exponentially. 

• Thank you for the time Mr. Chairman. 
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JOHN D. DING ELL 

15TH DISTRICT, MICHIGAN 

CHAIRMAN EMERITUS 

COMMITIEEON 

ENERGY AND COMMERCE 

CO·CHAm 

HOUSE GREAT LAKES 

1ASK FORce 

ME:MBER 

MIGRATORY BInD 

CONSERVATION COMMISSION 

~ngrt5s of thr CJ.a.nitrd ~tatrs 

ttouse of '1Reprc.scntatioc.s 

fllashington, 'Bit 205J5-2215 

February 17, 20'10 

Dr. Therese M. Vaughan 

Chief Executive Officer 

National Association ofInsurance Commissioners (NAIC) 

444 North Capitol Street NW 

Suite 701 

Washington, DC 20001 

Dear Dr. Vaughan: 

WASHINGTON OFACE: 

ROOM 2328 

RAYBURN HOUSE OFFICE BUILDING 

WASHINGTON, DC 20515-2215 

12(2) 225-4!J71 

DISTRICT OFFIC£S: 

19855 WEST OUTER DRIVE 

SUITE t03-£ 

DEARBORN, M! 48124 

{3la) 278-2935 

23 EAST FRONT STReET 

SUITE 103 

MONROE, MI48161 

(734) ~43-184g. 

301 WEST MICHIGAN A.VENUE 

SUITE 305 

YPSILANTI. MI48197 

(734)491-110(} 

The Energy and Commerce Subcommittee on Oversight and Investigations will convene 

a hearing on February 24,2010, regarding reports that Anthem Blue Cross, a subsidiary of 

WellPoint, Inc., is increasing its premium rates by as much as 39% in the individual health 

insurance market in California. The size of the increase and thc stated reasons for the increase 

has been concerning. 

For the benefit of my colleagues and so that I may better understand the insurance rate 

increases across the cotmtry and their purported cause or causes, I request that the National 

Association of Insurance Commissioners (NAIC) answer the following questions in regards to 

the practices in each of the 50 states and the District of Columbia: 

1. State health insurance commissioners playa critical role in the regulation of health 

insurance. They are the front line in preventing excessive increases. What is the current 

process states have in place for health insurance filing and rate review? 

2. Do state insurance departments hold hearings during the rate filing and review process? 

3. What is the history of rate increases requested and approved for all major health 

insurance carriers in the individual market during the past five years? 

4. What authorities do state insurance commissioners have at their disposal to deny 

excessive health insurance rate increases? 

5. What do state insurance commissioners do fOImalIy or informally to prevent excessive 

rate increases? 

THIS MAILING WAS PREPARED, PUBLISHED, AND MAILED AT TAXPAYER EXPENse 

THIS STATIONERY PRINTED ON PAPER MADE OF RECYCLED FIBERS 

<!!<!!9>-n 
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Dr. Therese M. Vaughan 

Fcbmary 17, 2010 

Page 2 

6. Wbat are the underlying causes of the recent health insurance rate increases? 

7. In your best professional judgment, do the state insurance commissioners have adequate 

resources and authorities to prevent the current pattern of rate increases? 

Please submit your responses to my office no later than Tnesday, February 23, 2010. 

They will be invaluable in informing congressional hearings on and general debate of this matter. 

Should you have any questions, please feel free to contact me directly or have a member of your 

staff contact Virgil Miller or Katie Campbell in my office at 202-225-4071. 

With every good wish, 
108 


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National Association oi 

Insurance Commissionel3 

February 23,2010 

Jl,;CENTER 

for INSURANCE 

POLICY 

and RESEARCH 

The Honorable John Dingell 

2328 Rayburn House Office Building 

Washington, DC 20515 

Dcar Representative Dingell: 

This letter is in response to your inquiry of February 17 regarding rising premiums in the individual health 

insurance market and state efforts to prevent excessive premium increases. State insurance regulators share your 

great concern over this very important and troubling issue. Most states do require insurers in the individual 

market to obtain prior approval of proposed rate increases before putting them into effect. This review is based 

on rigorous, objective actuarial analysis and objective, well-defined standards. 

Individual health insurance, wherc approximately 9 percent of all Americans receivc their covcrage, is subject to 

all of the same cost pressures as other forms of health coverage. The rapid rate of health care spending growth 

continues unabated and places upward pressure on all types of coveragc. Marketing, underwriting and 

administering policies is also much more expensive for insurers in the individual market than in the small- or 

large-group markets. 

Because individuals purchasing insurance on their own must pay the entire premium, they arc far more sensitive 

to premium increases than those who receive coverage from an employer that heavily subsidizes premiums. This 

greatly increases the volatility and risk of adverse selection that can drive up premiums in tbe individual market, 

as the first to drop coverage, particularly in difficult economic times, are the young and healthy who do not 

foresee an immediate need for medical care. As long as underlying health costs remain high, and individuals can 

opt in and out of coverage as their needs change, this will continue to be the case. 

Because of the continued and persistent volatility of the individual market, the NAIC welcomes Congress' efforts 

to enact comprehensive health reform legislation. Health insurance exchanges have the potential to facilitate 

easier comparison of policies and reduce marketing costs associated with individual policies. Extending 

guaranteed issue and adjusted community rating to the individual market would make insurance more accessible 

and affordable for those with pre-existing conditions and would virtually eliminate underwriting expenses. Of 

course none of these reforms will be possible without an effective individual mandate and subsidies that would 

greatly reduce the volatility of the marketplace and mitigate adverse selection. We continue to support these 

efforts and to offer our experience and expertise to help reach this goal. 

Rate Filing and Review 

In 47 states and the District of Columbia, insurers are required to file individual market premiums with state 

insurance regulators (Attachment A). When filing rates, insurers will submit the base rate that they intend to 

charge for a given policy form. From this base rate, insurers will reduce or increase the premium charged a given 

individual using a risk classification system that adjusts for the individual's age, gender, health status and other 

factors, as permitted by state law. The rate filings would generally include risk classification relativities for age 

and gender, however factors to adjust for health status are not generally included in rate filings, but are subject to 

examination during a market conduct review. 
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In examining rates, actuaries working for the Department of Insurance will review them for compliance with 

statutory and regulatory requirements and will examine past loss and expense experience of the insurer to 

detennine if the prospeetive rates are reasonable given the benefits included in the policy. Thcy will also ensure 

that the prospective rates are sufficient to pay all expected claims and that they are not unfairly discriminatory to 

any individual or group of individuals. They will also examine the insurer's assumptions, such as the expected 

growth of medical costs and expected changes in the health of those enrolled in the policy. Many states will also 

e,amine the proposed rates to ensure that the policy meets or exceeds the state's minimum loss ratio requirements. 

I f the state detennines that the proposed rate does not meet its requirements, it can deny the rate outright or 

propose a lower level of increase. 

Of the states that require individual market rates to be filed, 28 states and the District of Columbia require "prior 

approval." In many cases, if the Commissioner has not taken action within a certain number of days, the rate 

filing will be deemed approved. In some cases, certain rates are exempted from filing, such as ifrates are not 

increasing by more than 10 percent. In addition to those states requiring prior approval of rates, 12 have "file and 

use" requirements. In these states, rates must be filed with regulators prior to their use, and regulators may have 

authority to deny an insurer's ability to implement these rates. The remainder of states either has "use and file" 

requirements, require filings for infonnational purposes only, or only require rates to be submitted with policy 

fonns (the contract that states the benefits, tenns, and conditions of policies). 

Rate Review Hearings 

Many state regulator do have the option to hold public hearings to examine proposed premium increases by health 

insurers, the NAIC does not have infonnation on the exact number of states that hold hearings. In addition, in 

many states, insurers are pennitted to challenge the denial of a proposed rate increase in a public hearing. We 

are currently surveying our members on a number of issues, including this one, and will provide you with this 

infonnation as soon as we have the results. In general, however, public hearings can help provide additional 

transparency to the process and can help educate the public on this issue. 

History of Rate Increases for Major Insurers 

The NAIC does not collect national data on premium increases or requests, and is therefore unable to provide the 

requested historical infonnation. We did, however, conduct an infonnal survey of the states in October 2009 

regarding premium increases in the small group market, in which we asked whether they were seeing similar 

trends in the individual market. (Attachment 8) Ofthe 16 states that responded to this question, seven reported 

that premiums in the individual market were increasing at a faster rate than in the small group market. Two states 

reported that premiums were increasing more slowly in the individual market and the remaining seven reported 

that trends were similar to those in the small group market. A number of states cited specific premium increase 

requests in their survey responses: 

• Iowa reported an average increase of 12.4 percent for 2009, approximately in line with recent years. 

State regulators were successful in reducing approximately 50 percent of major medical premium 

filings. 

• Maryland reported requested increases ranging fTOm 7 percent to 24 percent in the individual market. 

• Minnesota reported increases ranging from 7 percent-I 0 percent 

• New Mexico reported premium increases that are notably higher in the individual market than in the 

small group market. One request for an increase of 36.4 percent was modified to 24 percent, while 

another was reduced from 27 percent to 8 percent. 

• Oregon reported that the averagc requested increase in the individual market was 17.9 percent. Some 

filings were approved, but others were negotiated dOWl1 to lower rates, and two were denied. 

• Pennsylvania reported premium increases substantially higher than historical patterns would indicate. 

The three largest carriers in the state requested increases ranging from the high teens to as much as 50 

percent. The Department challengcd thcse requests, and the insurers reduced them to less than 10 

percent. 

• Vennont reported increases below I percent in the individual market. 

• West Virginia reportcd that one major carrier slightly decreased premiums, while the other increased 

them by 16.3 percent. 

2 
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Authority to Deny Excessive Rate Increases 

The authority to deny excessive premium incrcases varies from state to state, but in every state where that 

authority does exist, regulators must demonstrate that premiums are not actuarially justified. This normally 

requires regulators to show that the insurcr's medical loss ratio has fallen to an unacceptable level, that the 

projected increase in premium does not match the projected medical trend for the policy, that thc insurer is 

holding excessive reservcs, or that the insurer's assumptions arc faulty. Regulators cannot, however, deny 

premium increases merely because they "seem" too high. While high premiums are undoubtedly a major burden 

for consumers, and something that we must all be vigilant about, insurers must collect premiums that are 

sufficient to pay all claims under the policy and maintain sufficient capital reserves to meet legal solvcncy 

requirements. For this reason, rate review must be an objective process, guided by actuarial science, careful 

analysis and defined, well-understood standards. 

Formal and Informal Efforts to Prevent Excessive Increases 

States have relied upon a number of different strategies to prevent excessive premium increases in the individual 

markct. As I have noted, nearly every state requires rates to be filed by insurers, and a majority do require prior 

approval of rates. In addition to these efforts, some states have attempted to combat the deterioration of particular 

blocks of business by limiting the variation between blocks attributed to experience, policy duration, and health 

status. As a result, the insurer will not be able to isolate poor risk in a single block of business with rapid 

premium increases because they would be required to raise premiums on a better performing block to comply 

with the limits on variation between blocks. 

Underlying Causes of Premium Increases 

As noted above, individual market policies are subject to the same cost pressures as policies in the large- and 

small-group markets. In our experience, the single most significant contributor to rising health insurance 

premiums has clearly been the continued growth ofhcalth care spending in the Unitcd States. This growth affects 

all types of coverage: group, individual, and government-sponsored plans. Medical technology continues to 

advance at an amazing pace, bringing lifesaving treatment, that arc nevertheless very expensive. Multiple 

treatments for once incurable diseases are now available. which arc administered over long periods of time by 

subspccialists, where less than a generation ago a primary care practitioner would have provided palliative care 

over a short period of time. Obesity continues to grow at an alarming rate, particularly among the youngest 

Americans, bring diagnoses oftype-2 diabetes at once unimaginable ages. Smoking, while not as prevalent as it 

once was, still continues to cause serious health problems and add to our national health care expenditures. While 

rate review can help keep insurers focused on constraining the growth of these costs, it cannot fundamentally 

address the growth ofhcalth care costs, which must be addressed through payment reform, delivery system 

changes, an emphasis on prevention, and consumer engagement. 

In addition to the underlying growth of health care spending, individual market policies are subject to much 

higher risks of adverse selection than group plans, for the reasons that were explained above. In weak economic 

times, young and healthy individuals tend to drop or reduce coverage at greater rates than older and sicker 

individuals, leaving risk pools with higher average costs. This adverse selection compounds the effects of high 

medical trend costs. 

Further compounding cost growth, individuals whose personal characteristics change prior to policy renewal 

might have larger premium increases. The most significant factor in this regard will be an individual's age, which 

can cause premiums to vary in the individual market by a factor of 6: 1. Insurers typically use bands to apply age 

rating. and when an individual moves from one age band to the next, their premiums will increase. 

Finally, over time the experience of a particular block of business, or policy form, can deteriorate as the healthier 

enrollees who can pass medical underwriting for another policy change coverage to get a lower premiums. Those 

left behind, who because of pre-existing conditions camlot change their coverage, face an ongoing spiral of higher 

premiums. As I have mentioned above, states have attempted to address this problem. 

3 
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These problems have affected other types of individual policies, such as Medicare Supplement and Medicare 

Advantage polices, as wclL A study released just last week found that if a beneficiary in a federally-regulated 

Medicare Advantage plan remained in the same plan between 2009 and 20 I 0, their premium would have 

increased by 22 percent on average across all plans, by 26 percent for private fee-for-service plans, and by 76 

percent for regional PPO plans, 

All of these underlying issues, however, are very difficnlt to address, especially in the individual market, without 

an effective individual mandate and subsidies, We remain hopeful that comprehensive health reform, which 

would help address each of lhese factors, will be signed into law this year, 

Adequacy of Authority to Prevent Premium Increases 

As I noted above, there is some variation in the extent of authority that states have to deny rate changes, The 

NAIC worked with the administration and Members of Congress during development of the health reform bills to 

draft provisions that would encourage all states to grant regulators greater authority to disapprove excessive rates, 

These provisions would also have provided additional resources to the states to review rates, which can be a very 

labor intensive and expensive process, Even paying salaries that are well below market rates for actuaries, the 

California Department ofinsurance estimates that adding prior approval of premiums would cost that state alone 

at least $15 million per year, with additional start-up costs in the early years. We continue to support these 

provisions, but would also note that it is crucial that authority to regulate rates at the state level be preserved, 

Providing the federal government with authority to override state regulatory determinations on rates while 

solvency regulation remains at the state level risks uncoordinated financial regulation that would greatly increase 

the risk of insurer insolvency without providing additional protection for consumers, As I noted above, even with 

a complex bidding process designed to keep Medicare Advantage premiums in check, premiums for seniors in 

those plans have grown at rates equal to or greater than those in the individual market 

Thank you for the opportunity to comment on this troubling issue. Insurer solvency has been, and must continue 

to be our primary concern, for, as painful as high premiums are, the pain of finding oneself unprotected because of 

an insurer has gone insolvent is much worse, State regulators are nonetheless painfully aware of the impossible 

situation that high premiums in the individual market cause for millions of Americans, At the end of the day, 

however, while rate review authority is an important tool for regulators, and can help keep insurance companies 

honest, it can do nothing to reduce claims expenses, which arc the biggest component of the premium dollaL I 

hope that this information has been helpful to you, Please do not hesitate to call upon us if you have additional 

questions or if we can be of additional assistance, 

Sincerely, 

Therese M, Vaughan, Ph,D, 

CEO 

National Association of Insurance Commissioners 

4 

Insert offset folio 119 here 76009A.042jbell on DSK7SPTVN1PROD with 

ATTACHMENT A-NAIC Form and Rate Filing Chart 

NA1C's Compendium of State l.aws on Insural\Ce Topics 

FILING REQUIREMENTS 

J-IEALTI-IINSURANCE FORMS 

. . 

- --

--- - ----

____ __ 

• 

___ ________ __ ____ __ ___ 

• 

_____ 

• A_ . __ , _______ . 

STATE CITATION FORM FILING FEE RATE FILING RATE FIL

REOUIREMENT REOUIREMENT APPLmS

AL § 27-14-8; Prior approval FiHng required for Accident & Heal

(2109) Ins. Reg. 482-1-024 (30 d"y deemer) infonnational purposes only. 

AK §§ 21.42.120, 21.42.123, File and use with 30 day Retaliatory Prior approval; file and use if Each lnsurer 

(2/09) 21.42.125,21.09.270, waiting period with change is no greater than 

21.39.040,21.39.210 compliance certificate; 10%. 

Prior approval (30 day 

deemer) without compliance certificate. 

Order 83-1(exempts certain 

forms) 

AZ pO-1 110 Prior approval Individual Healt

(2/09) (30 day deemer) 

Reg. 20-6-607 Filed for review (HCSO and 

group health fomls are not 

filed). 

AR § 23-79-109; AR Ins. Rule Prior approval $50 policy, rider, Prior approval (30 day Individual Health 

(2/09) & Reg. 57 (30 day deemer) application, per deemer) 

submission; 

$20 for each rider, 

application or 

endorsement tiled 

separately; 

$20 for corrections in 

previously filed fOnTIs. 

$50 for each rate filing. 

© 2009 National Association of Insurance Commissioners U

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ATTACHMENT A-NAIC Form and Rate Filing Chart 

NAIC's CompendIum of State Laws on Insurance TopIcs 

FILING REQUIREMENTS 

STATE CITATION FORM FILING FEE REQUIREMENT 

CA Ins. Ss 795.5, 10290, Prior approval (30 day Indiv./Group Health, 

(2109) 10236.13; Ca. Admin. deemer) Long Term Care: $580 

Code til. 10 § 2202 Policy; $130 Rider; 

$130 New Issue Rate; 

$170 Rate Increase. 

Medicare Supp.: 

$330 Policy; $60 Rider; 

$130 Rates; Sl30 Rate 

Increase. 

CO §§ 10-16-107, 10-16-107.2, Prior approval Included in general fce 

(2109) 10-lO-109; Ins. Reg. 1-1- for services. 

6; 4-2-11,4-4-2; CO 

Bulletin B-4.18 

§ 10-16-321; 

Ins. Reg. 4-3-1 

© 2009 National Association of Insurance Commissioners 

RATE FILING 

IIEAlfillNSURANCE FORMS 

RATE FIL

REQUIREMENT APPLIES 

File Individual Health 

Group Health, M

Supplement, Cre

Prior Long T errn Care 

Prior Approval (60 day Allllealth includ

deemcr); no need for Tcnn Care and C

approval if no increase and Disability. 

requested (file and use). 

Prior Approval (30 day Medicare Supple

dccmcr) 

II-

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ATTACHMENT A-NAIC Form and Rate Filing Chart 

NAIC's Compendium of State Laws on Insurance Topics 

FILING REQUIREMENTS 

STATE CITATION FORM FILING FEE REQUIREMENT 

CT §§ 38a-182, 38a-183, Prior approvaJ Retaliatory 

(2/09) 38a-474, 38a-481, 38a-513; 

Reg< 38a-652; Reg< 383-

481-1 to 38a-481-4 

DE til, 18 §§ 701, 2504, 2712, Prior approval (30 day SSO policies, riders 

(2/09) 3333 deemcr) appl (cations, 

endorsements 

$50 rate changes 

DC §§ 31-4712, 31-3508 Prior approval (30 day 

(2/09) deemer) 

§ 31-3109 

FL § 627.410 Prior approval 

(2109) (30 day deemer) 

© 2009 National Association of Insurance Commissioners 

HEALTH INSURANCE FORMS 

-_._--

RATE FILING RATE FIL

REQUIREMENT APPLIES 

File and usc Group LTC cred

Prior approval (45 days) HMOs, med< sup

health 

Prior approval (30 day Individuat health 

deemer) noted above. 

File and use (45 days) All Health includ

Supp<, LTC, HM

Service Corps. 

Prior approval (30 day Individual Accid

deemer) Sickness 

File and Use (60 day review) Hospital & Medi

Services Subscri

Contracts 

Prior approval (90 day Health products 

dccmer) mental ilJncss be

or alcohol abuse 

Prior approval All Health 

(30 day deemer) 

Il-

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ATTACHMENT A-NAIC Form and Rate Filing Chart 

NA1C's Compendium of State Laws on Insurance Topics 

FILING REQUIREMENTS 

------ --------- ---------- -----------------

------------

STATE CITATION FORM FILING FEE REQUIREMENT 

GA § 33-24-9,33-8-1,35-57-5; Prior approval $25 form 

(2/09) Reg. 120-2-10-.06, (90 day deemer but could be $75 rate 

Reg. 120-2-25 (specifies extended for additional 90 

limited exemptions from days) 

filings); 

§ 33-57-5; GA Bulletin 

L&H-2 

HI §§ 431: lOA-I 13, 431 :IOA- hie-individual health $20 per form 

(2/09) 309 Prior approval-med. supp. S50 per rate filing 

§431:14G-105 $20 for form and rate 

filing 

lD §§ 41-1812, 41-2136; File and use, certification For rate and form 

(2109) Ins. Reg. 18.01.44 §§ 011, required filings not filed with 

040 SERFF and in excess of 

10 per calendar year, 

$20 hJr each rate or 

form. 

IL 215lLCS 51143, 5/355, Prior approval $50 per form; $200 per 

(2/09) 51408; Reg. tit. 50 § 916.40 Conn for advisory and 

ratings orgs. 

© 2009 Nalional Association of Insurance Commissioners 

HEAL T!-IINSURANCE FORMS 

RATE FILING RATE FIL

REQUIREMENT APPLIES 

Infonnation tiling required All Health 

for any rate increase or new 

program; increases must also 

be filed with Consumer's 

Insurance Advocate, 

Annual compliance filing Approved plans 

Prior approval All managed car

File and use, certification Individual Health 

required. 

Rate filing shall be submitted Individual Health

with policy Conn filing. Medicare supple

Individual and G

Tenn Care 

II-

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ATTACHMENT A-NAIC Form and Rate Filing Cilart 

NAIC's Compendium ofStatc Laws on fnsurance Topics 

FILING REQUIREMENTS 

STATE CITATION FORM FILING FEE REQUIREMENT 

IN § 27-8-5-1 Prior approval (30 day $35 

(2/09) deemer) 

§27-13-7-ll Prior approval (30 day $35 

deemer) 

§§27-13-20-1 Prior approval 535 

to 27-13-20-2 

§ 27-1-3-15 

IA §§ 514A.13; Prior approval 

(2109) Reg. 191-30.5, 191-36.9 (30 day deemer and 60 days 

prior to effective date) 

KS §§ 40-216, 40-2215 Prior approval (30 day 

(2109) dcemcr) 

KY §§ 304.1 4-120, Prior approval S\OO; $5 all other forms 

(2109) 304.17-380,304.1 7-383, (60 day deemer) 

304.17 A-095; 

Reg. 806 KAR §§ 14:007, 

15:150.4:010 

«) 2009 National Association of Insurance Commissioners 

HEALTH INSURA;-"!CE FORMS 

RAn: FILING RATE FIL

REQUIREMENT APPLIES 

File and use (30 days) Group Health 

Prior approval (30 day Individual Health 

deemer) 

Prior approvaJ HMOs 

Prior approval Allllealth 

(30 day deemer and 60 days 

prior to effective date) 

File and use Individual and G

Health 

File and use All Health 

II-

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ATTACHMENT A-NAIC Form and Rate }'i1ing Chart 

NAIC's Compendium of State Laws on Insurance Topics 

FILING REQUIREMENTS 

STATE CITATION FORM FILING FEE REQUIREMENT 

LA §§ 22:211, 22:620, 22:972; Prior approval (45 day S 1 00 per company per 

(2/09) Reg. 78; § 10107 dcemcr) product lor insurance 

(37:XIlI.10107) policy filings 

§ 22:1078, Reg. 33 §545 Prior approval (45 day Rates - $100 per 

and 550 (37:XlII.545 and deemer) company per type of 

550) standard benefit plan 

Reg. 46 § 1917 and 1937 Prior approval (45 day No filing fees required 

(37:XIlI.l917 and 1937) dcemer) for rate for Long Tcnn 

Care 

ME tit. 24-A §§ 601, 2412, Prior approval Cannot exceed $20 per (2/09) 2736,2802,5004,501 I, (30 day deemer) rate or foml filing 

5075-A; Ins. Reg. eh. 940, 

755,275,425, 140; 

Bulletin 146, 325, 326 and 

337 

MD Ins. §§ 12-203, 12-205, Prior approval $125 per fonn and rate 

(2/09) 2-112; Reg. 31.10.01.02, (60 day deemer) 

31.10.01.02A,31.04.17 

© 2009 National Association of Insurance Commissioners 

HEALTH INSURANCE FORMS 

RATE FILING RATE FIL

REQUIREMENT APPLIES 

File and use (30 day deemer) All Health 

Prior approval Long term cafe 

Prior approval All individual he

insurance, group 

care and group M

supplement. 

Also applies 10 s

employer medica

unless written on 

optional "guaran

ratio" basis (used 

plans) under whi

not require approrefunds are requi

loss ratio is below 

Prior approval (90 days for All health 

changes) 

I1-H

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ATTACHMENT A-NAIC Form and Rate Hling Chart 

NAIC's Compendium of State Laws on Insurance Topics 

FILING REQUIREMENTS 

HEALTH INSURANCE FORMS 

MA § 175:110; No filing required $75 per form No filing required Health group 

(2/09) Reg, 80 I CMR 4,02 $150 per rate 

§ 176J: 3; File and use No rate filing. actuarial Small group 

Reg, 211 CMR 66,13 certification required 

§§ 176:4 to 176:5; Prior approval (standard Prior approval Non-group 

Reg, 211 CMR 41.00 plan) 

© 2009 National Association of Insurance Commissioners 11-

Insert offset folio 126 here 76009A.049jbell on DSK7SPTVN1PROD with 

A TT ACHMENT A-NAIC .'orm and Rate Hling Chart 

NAIC's Compendium of State Laws on Insurance Topics 

.FILING REQUIREMENTS 

I STATE CITATION FORM FILING FEE REQUIREMENT 

i MI 500.2236, 500.2242(a), Prior approval (30 day None 

I (2/09) 500.3474 decmer) Reg. 500.80 I to 500.806; 

Order 97-010-M 

MN §§ 62A.02, 60A.14 Prior approval (60 day $90 per rate or fonn 

(2/09) deemer) filing; S75 per form or 

rate if filed 

electronically 

§ 62A.02, Subd 2(b) 

MS § 83-9-3; Prior approval $15 poliey 

(2/09) Ins. Reg. A&H 73-4 $10 riderj endorsement 

$10 application 

MO §§ 376.405, 376.777.7, Prior approval (60 day $50 

(2/09) 354.150,354.495; deemer) 

Reg. tit. 20 § 400-S.200 

MT §§ 33-2-708, 33-2-709. Prior approval (60 day No fees for filing [onns 

(2/09) 33-1-501; MT ADC decmer) or rates 

6.6.S0SA, 6.6.1107 

Prior approval for Medicare 

Supplement 

© 2009 National Association of Insurance Commissioners 

HEAL fH INSLRANCE FORMS 

RATE FILING RATEHL

REQUIREMENT APPLIES 

File and use Individual Health 

Prior approval (60 day All policies 

deemer) 

File and usc Rates related to a

sickness as defin

I. Does n

Medicare-related 

Prior approval Med. Supp. and 

Filed for review and Other Health 

acknowledgment 

No provision 

Prior approval for rates Credit insurance 

higher than those established. 

Rates must be accepted prior Med. Supp. to usc. 

U-H

Insert offset folio 127 here 76009A.050jbell on DSK7SPTVN1PROD with 

ATTACHMENT A-NAIC Form and Rate Filing Chari 

NAIC's Compendium of State Laws on Insurance Topics 

REQUIREMENTS 

----

STATE CITATION FORM FILING FEE REQVIREMENT 

NE § 44-710; Reg. tit. 20 eh. Prior approval Retaliatory 

(2109) 009 

§44-450 I; Reg. tit. 210 eh. Prior approval 

46 

Reg. tit. 210 eh. 36 Prior approval 

NE Bulletin CB·50 

NV §§ 680B.01O, 687B.120, Prior approval $25 rates and policy 

(2/09) 689A.360, 680B.01O; NV (45 day deemer) $10 rider or 

ADC 687B.229 endorsement 

NH §§ 415: I, 415:18, 400· Prior approval (30 day Retaliatory 

(2109) A:35; Reg. Ins. 401.02, dcemer) 

401.03 

NJ §§ 17B:26·1, 17B:27·25, Prior approval 

(2/09) 17B:27-49, 17B:27E·ll, (60 day deemer. Re· 

17B-27-74; submission - 30 day dcemer) 

Reg. 11:4·16, Option to file and use 

U:4·18,11:4·40 available for certain fonus 

NM §§ 59A·18·12, 59A-l8·13, Prior approval $30 policy package 

(2/09) 59A-6-1 (60 days) S15 incidental forms 

$50 rate filing 

© 2009 National Association of Insurance Commissioners 

HEALTH INSURANCE FORMS 

RATE FILING RATE FIL

REQVIREMENT APPLIES 

Rate schedules shaH be filed All other Health 

with policy fomls. 

Long T enn Care 

Prior approval Med. Supp. 

file and use Individual Health 

Prior approval Medicare Supple

Prior approval (30 day All indi vidual he

decmcr) med supp., LTC, 

employer medica

or surgical 

File and use (30 days) All other group h

Prior approval (60 day Individual Health

deemer. Resubmission --

30 day deemer) 

Prior approval (60 day notice All Health 

to policy holder) 

II-H

Insert offset folio 128 here 76009A.051jbell on DSK7SPTVN1PROD with 

ATTACHMENT A-NAIC Form and Rate Hling Chart 

NAIC's Compendium of State Laws on Insurance Topics 

FILING REQUIREMENTS 

STATE CITATION FORM FILING FEE REQUIREMENT 

NY Ins. Law §§ 3201,4308, Prior approval (90 day None 

(2/09) 4235(h); 11 NYCRR deemer) 

52.40 

NC §§ 58-6-5, 58-51-85, Prior approval (90 day None 

(2/09) 58-51-95, 58-65-40, 58-68- deemcr) 

45,58-67-50 HSCO - Prior approval 

(within reasonable time) 

NO §§ 26.1-11-06, 26.1-30-19 Prior approval (60 day Retaliatory 

(2/09) to 26.1-30-20 deemer) 

OH §§ 3923.02, 3923.021; OH Prior approval (30 day $50 fomls; no fee for 

(2/09) AOC 3901-1-57 deemer) rate filings 

OK tit. 36 §§ 321, 3610, 4402, Prior approval $50 policy or retaliatory 

(2/09) OKAOC 365:10-5-63, (30/60 day deemer if higher 

365:10-5-47.1 depending on type of filing) $25 rider or retaliatory 

ifhigher 

© 2009 National Association of Insurance Commissioners 

HEALTH iNSURM"CE FORMS 

----------

RATE FILING RATE FIL

REQUIREMENT APPLIES TO: 

Prior approval Individual health 

and blanket fonu

jurisdiction appl

Prior approval (all individual All Health 

rate revisions, group rued. 

Supp., medical service corp. 

rates) 

Prior approval (60 day All Health 

decmer) 

Prior approval (30 day All Health 

deemer) 

Rates filed with fonl1. All Health, Cred

Health 

II-H

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ATTACHMENT A-NAIC Form and Rate Filing Chart 

l\AIC's Compendium of State Laws on Insurance Topks 

l<'ILlNG REQUIREMENTS 

STATE CITATION FORM !'ILiNG FEE REQUIREMENT 

OR §§ 742.003, 746.005, Prior approval (30 day 

(2109) 743.018, decmer) 

743.730(17)(27)(28), 743.737,743.760; 

Reg. 836-010-00 II 

§ 836-052-0114 Prior approval 

§ 836-060-0043 

§ 836-060-0026 to 836-

060-0031 

Reg. 836-052-0510 Prior approval 

© 2009 National Association of Insurance Commissioners 

I!EALTH INSCRANCE FORM

RATE FILING RATE FIL

REQUIREMENT APPLIES 

Prior approval Individual and g

except groups w

than 50 lives 

Prior approval Medicare supp., 

specific groups u

836-052-0114(5

Prior approval ([or deviations Credit life and h

from prima facie) 

File and usc (for statutory Credit life and h

prima facie) 

Long term care i

and groups 

II-

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ATTACHMENT A-NAlC Form and Rate Filing Chart 

of State Laws on Insurance Topi;:;s 

FILING REQUIREMENTS 

STATE CITATION fORM flLlNG n:E REQUIREMENT 

PA ** 40-18-3809,40-18- Prior approval (30 day Retaliatory 

(2109) 3803; 49 P.S. § 50 deemer) 

Rl *§ 27-18-8, 42-14-18, Prior approval $40 policy and related 

(2109) Reg. R27-23-1101 to (60 day deemer) forms filed together; 

R27-23-1102, $25 revised rate or R27-23-1106 to form; retaliatory on fcc v 27-23-1107 by-fee basis. 

SC §§ 38-71-310, 38-71-720; Prior approval (30 day 

(2109) Reg. 69-46; deemer) 

Bulletin 2-93 

SD ** 58-11-12,58-11-17, Prior approval 

(2/09) 58-17-4.1 (30 day deemer) 

TN 9956-26-102; Prior approval (30 day 

(2/09) Reg. ch. 0780-1-20 dcemcr) 

TX Reg. 28 TAC 3.1, 3.4; Ins. File and Use with certificate $50 exempt from 

(2109) §§ 11153.051,1701.051 to of compliance; Prior review; $100 not 

1701.054 Approval without certificate exempt. 

(60 day deemer). 

UT § 31A-21-201, 3IA-3-J03, File and use Included in annual fee 

(2/09) 31a-3-108; 

Reg. R590-220 

© 2009 National Association of Insurance Commissioners 

HEAL TI-I INSURAl"CE FORMS 

RATE FILING RATE FIL

REQUIREMENT APPLIES 

Prior approval (45 day All Health; some 

dccmcr) exempt if meet 

requirements 

Prior approval (60 day AIlIIealth 

deemer) 

Prior approval Individual Health

(90 day deemcr) Group Med. Sup

File and use (30 day deemer) Individual health 

Prior approval (30 day All health except 

decmcr} experience rated 

File and Use Individual Health

Tenl1 Care, Cred

Accident and He

Supp. 

File and use Individual health

Supp., long tenn 

health benefit pla

II-H

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ATTACHMENT A-NAIC Form and Rate Filing Chart 

NAIC's Compendium of State Laws on Insuraw.;c TopIcs 

FILING REQUIREMENTS 

HEALTH INSURANCE FORMS 

STATE CITATION FORM FILING FEE RATE FILING RATEHL

REQUIREMENT REOUIREMENT APPLIES 

VT Ins. Reg. 93-5: til. g §4062 Prior approval (30 day Prior approval (30 day All health 

(2/09) deemer) deemer) 

VA § 38.2-316; Reg. 14 VAC Prior approval File and receive Group health 

(2/09) 5-100-10 to 5-100-80; Reg. (30 day deemer) acknowledgment 

14 V AC 5-130-10 el. seq.; 

14 VAC 5-170-120,14 Prior approval Individual health

VAC 5-200-77; 150 and supp. 

153 

WA § 48.44.020 File and use No fee Prior approval (60 day Healthcare servic

(2/09) deerner) contractor,large 

§ 48.46.060 File and use No fee Prior approval (60 day HMO large grou

deemer) 

§§ 48.18.100, 48.18.010, Prior approval No fee Prior approval (30 day Small group heal

48.19.010,48.20.025, (30 day deemer) deemer) rate changes, me

48.21.045,48.66.035, 48.44.017,48.44.023, Prior approval (60 day Individual health 

48.46.062,48.46.066 decmer) 

File and use (subject to All other health 

disapproval) 

WV §§ 33-6-8, 33-6-34, Prior approval S50 per fonn Prior approval (60 day All health 

(2/09) 33-16B-I; 114CSR26-3 (60 day deemer) $75 per rate dcemer); Rate filings 

required for new products or 

rate changes; rate filings 

shall be tiled with fonns. 

§ 33-6-8(b)(2) File and use (30 day Mass-marketed H

disapproval) 

ct) 2009 National Association of Insurance Commissioners II-H

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ATTACHMENT A-NAIC Form and Rate Filing Chart 

NA.!C's Compendium of State Laws on Insurance Topics 

FILING REQUIREMENTS 

STATE CITATION FORM FILING FEE REQUIREMENT 

WI §§ 625.13, 63 L20; WI Prior approval None 

(2109) Bulletin 4-28-2008; (30 day deemer); May tile 

Reg. § INS 6.05 and use with certification; 

docs not apply to long-term 

care or Medicare 

Supplement. 

WY §§ 26-15-110, 26-18-135 Prior approval No fcc 

(2109) (45 day deemer) 

RATE FILING 

HEALTH INSURANCE FORMS 

RATE FIL

REQUIREMENT APPLIES 

Use and file (30 days) Individual health 

File and use Disability 

This chart does not constitute a formal legal opinion by the NAIC staff on the provisions of state law and should hOt be relied upon as such. [very cHort has been made to provide correct 

summaries to assist the reader in targeting useful information. For further details, the statutes and regulations cited should be consulted. The NA1C attempts to provide current informat

readers should consult state law for additional 

«, 2009 National Association of Insurance Commissioners 1I-H

Insert offset folio 133 here 76009A.056jbell on DSK7SPTVN1PROD with 

ATTACHMENT B-NAIC Survey on Small Group Premium Increases 

Questions OH ME WA CT MD MN O

What has your state seen 10% to 15% A verage increases Regence 14,5% for the The top 10 7-10% Rangin

carriers = 15.6% thus far in the rate filings are 21%, up from BlueShicld): HMO small group renewal rate (-5.4) p

for small business plans? 15% in 2009, 13,6%, market. increase with a The rate increases 14,10 p

What companies are 

Asuris NW range from 8% to on high- asking for increases, on Averages by Health: 13,6%, 25% for the 1st deductible plans Exclud

what products, how company group: are somewhat rate dec

much? quarter of20 10, higher, maybe 12- average 

Anthem 20% Group Health 15%, , is 11.9 

Cooperative: That compares 

Aetna 25% 12.7%, (With to an average The ma

benefit reduction: 16.3% renewal 

9,6%,) increase with a rate inc

Harvard Pilgrim range from 11 % approve

13% Group Health to 25% for the 4th than the 

Options: 19,8%, quarter of2009 in medi

(With benefit (eg, 10/2009 over prescrip

reduction: 14,6 10/2008), (trend), 

%,) 

Regence The dominant BlueCross insurer"'" 14% BlueShield of with a range from 

Oregon: 19,5% 3% to 25% depending on 

Kaiser particular benefit Pennanentc design, 

Health of tl,e 

NW:9,8% HSAs will see 

renewal increase 

KPS Health Plan: from 19% to 25% 

10.4% while the more 

traditional 

Providence product designs 

Health Plan: 9,6% will see renewals 

from just 3% to 

PacifiCare of 11%, 

Washington: Negative 10.0%. 

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.-TTACHMENT B-N .. - " .. .. -IIG .. ,,- p _ .111 .. 1 .... "''''''' 

Questions OH ME WA CT MD MN 

What justifications are Trend If loss ratios arc Medical and drug Increased Poor past Utilization Utilizat

companies using for the less than 78%, trend (mid-teens) utiiization experience due to Trend 

rate increases? What Wearing off of premium refunds higher claim costs Cost trend 

factors arc driving underwriting arc required, so Utilization Cost trend than expected. Membe

insurance rate increases in justification not losses 

your slate? Higher loss ratio required. Employee costs New mandates or Underestimation Cost co

than expected adjustment to of annual claim improv

Increase in cost Mandated current mandates cost trends. contrac

and utilization. benefits (organ patient

transplant and HINI costs Higher utilization, appropr

chemical particularly for settings

dependency) the high and chr

deductible/HSA manage

plans higher 

Loss of plans. 

membership. 

How are medical loss Ohio does not Major carriers are Most carriers Medical loss Maryland Medical loss The av

ratios expected to be allow carriers to subject to a have the ratios would be requires a 75% ratios should stay medica

impacted by the rate recoup past losses guaranteed loss anticipated (or expected to stay minimum loss about the same. grew fr

increases? with a rate ratio requirement. expected) loss the same or ratio on smalJ percent 

increase request. ratios around increase slightly. group business. 87.9 pe

80%. Many have 2008. 

exceeded that 

amount in recent Expect

years. in 2009

What actions have been More information A closed block of We have not Currently two Subject to prior In past years, Approv

taken by the state in ifnot found about 2,500 lives denied any 20 to requested approval. some have been modific

response to the rate reasonable. that has not ratc increases in increases for denied or 

increases? Have any been guaranteed the the small group small group After actuarial modified. This 

denied or modified? Disapprove if not loss ratio has filed market yet. A few premium review, some year none have 

justified. for a 33% carriers did increases have filings are been denied or 

increase for a request an been modi ned amended to an modified. 

Cannot catastrophic increase lower lower. MIA disapproval 

disapprove small medical plan. than the increase or a reduction in 

group, but can The AG requested projected in the the filed/proposed 

discuss with a public hearing rate filing. rale increase. 

------

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Questions OH ME WA CT MD MN O

carrier and work on this and it is 

to improve scheduled for 

request. February 25. 

Have similar rate Generally higher, Yes. The So far, we have To date, The renewal rate Yes, rate Somewha

increases of7- increases been requested but justified. following average only one carrier individual rate increases wi II 10% are common ranging f

for the individual market? increases have that has a 5.1% increase requests range from 7% to in the individual percent to 

been proposed in rate change with have been higher 24% but most market, and percent. the individual an effective date than what is being individual somewhat higher market: of 111/2010 for its seen in the small policyholders will for high- The aver

individual line of employer market be concentrated deductible plans. requested Anthem 22.9% business. = place. around either increase 

15% or 24% rate Rates cannot percent c

MEGA 12.5% increases (1/2010 change due to the to the 11

over 1/2009). emergence of percent a

Hearings are health conditions, for the sm

scheduled on All proposed so the trend employer 

these proposals. increases in the increase plus any individual market increase in age The Depa

are also subject to gi ves the actual has appro

prior approval by premium some of t

the MIA with the increase. filings as requisite actuarial submitted

justification. approved 

that were 

modified 

lower am

and disap

two of th

filings. 

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ATTACHMENT B-NAIC Survey on Small Group Premium Increases 

Questions KS RJ PA IA WV FL 

What has your state seen Low single digits 13 to 16 percent One HMO Average of l3% Mountain State Carriers have Blue C

requested a rate thus far in the rate filings up to about 13% increase increase of 5.5% Blue Cross Blue been requesting decrea

for small business plans? requested in May on an HMO Shield 7%. increases close to Human

What companies are asking product (less than Coventry Health medical trend ""- for new 

Cor increases, on what Tufts anew ll-14% 

products, how much? entrant - asked 51 subscribers) and Life Human

which was Insumnce for 9.5% approved as Company and for gro

submitted. Carel ink Health renewa

Currently a 13% Plans, Inc. Human

rate increase for ind

request for a decrease 0[0.3%. United 

small group United Health

product with Healthcare 6%. reducti

fewer than 300 Health Plan of the small g

subscribers is 

Upper Ohio pcnding before 

the Department. Valley (HMO) 1.2%. 

What justifications are Medical trend Administrative Medical trend More mandates Medical trend Companies are Medica

companies using for the costs using actual 

rate increases? What Network Provider contract Utilization Utilization experience to Increas

[actors are driving revisions Hospital pricing negotiations justify the ratio 

insurance ralc increases in Medical trend Demographics proposed rate 

your state? Pool experience Specialty Change in mix of. and claims increases. Utiliza

utilization business experience 

Aging population. Duration of 

coverage in the 

individual 

market. 

How are medical loss ratios The rate increases Majority of the The changes We ex

expected to bc impacted by appear to be an insurers are in requested ratios t

the rate increases? effort to maintain excess of the lypically bring modera

their original minimum 01'73% the actual loss not exp

anticipated ratio closer to the to nece

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TTACHME - ....... ..... ", ... .. . .... ,.,.. .................... 

Questions KS RI PA IA WV FL 

lifetime loss target. decrea

ratios. materia

What actions have been No specific Carriers told to We have not Justified rate The De

taken by tbe slale in actions have been withdraw for 6 denied or changes have often n

response to the rate taken to modify months or go to modi lied any been approved. for low

increases? Have any been the tiled ratc hearing. requested rate regardl

denied or modified? increases. adjustment since reques

Tuns re-tiled at the insurers have increas

8.5, the others not requested had su

chose to wait. excessive doing s

Have similar rate increases Slightly higher, Substantially Mountain State Yes, similar We are 

been requested for the up to about 18%. higher than Blue Cross Shield increases have abnorm

individual market? historicaJ paUcOls submilted filings been requested increas

Kansas routinely would indicate. a slight rate tor the individual in the i

seeks additional Three largest decrease. market. market

infonnation from arc les

the companies to health carriers in Assurant Health (see ab

the slate = high recently increased justify the rates teens and the their premiums with sm

requested and 20% to 30% for 2010 by groups

negotiates with range, with some approximately negotiathe companies to request

modify the requests as high 16.3 %. low as 

amount 

as 50%. 

requested. The Department 

challenged 

requests. The 

companies 

reduced increases to less than 10%. 

Questions VT ND OK CO NH NM 

What has your state seen Vennont has There has not Company A 1% Increases ofO- One carrier, a NIl Requested rate 15-20%

thus far in the rate filings three carriers been a noticeable increase over the 20% in the small start-up, had been changes range slightly 

for small business plans? authorized to sen increase in the 4th quarter 2009. group market. pricing its from (-1.2%) to last ye

----"--------

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.. TTACHMENT B-N "' ......... _ .. _· ... _.U .......... _ ...... " 

Questions VT ND OK CO NH NM 

What companies are asking in the small group rate increases Total request for Average of9%. products based on 9%. for increases, On what market: Blue requested. Only 2010 of 10%. consultant data. 

products, how much? Cross Bluc Shield one of these 

of Yermo nt, companies had Company Be N ow that they 

CIGNAand requested an overall rate have some 

MYP. increase (11.4%). decrease 5%. experience, which 

is worse than 

Rate requests of Company C expected, they are 

have ranged from overall rate including an negative 5% to impact of 0% additiona115% 

35.7%. with a maximum experience 

change of + 10% adjustment in 

and a minimum their rates. This 

change of -4%. means this one 

Company D 4% company's rates 

increase effective wiIl be going up 

IQ 2010. 30%. 

What justifications are Poor claims Medical trend, Medical trend Claim costs and Medical trend Increas

companies using for the experience driven primarily claim cost trends assessm

rate increases? What by inflation and Attain or that are running Deductibles last yea

factors are driving Medical trend utilization. maintain MLR at between 10 and 

insurance rate increases in target. 15%. Aging of the pool Utiliza

your state? Administrative fear of 

cost increases Mental Health their co

Parity coverage 

New mandated Medica

coverage's. 

How are medical loss ratios We have not seen No impact,- They're not Minimal impact 

expected to be impacted by any trend to attain or stay at expected to in the first year 

the rate increases? decrease medical MLR target. change at all. 

loss ratios in 

filings. In 

general, medical 

loss ratios have 

been steady. 

What actions have been The Department Department Most are So far, they are Some modified 

-- ---

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______ ___ 

• 

___ 

•• 

__ .. __ •• ..., 

............ _ .. ou_ _ • __ no_ ••• a_. __ ... _ .... " ... 

Questions VT ND OK CO NH NM 

taken by the state in denied a 35.7% approved 7.9% approved, others being approved as for age factor to 

response to the rate rate increase for the company are in process. filed. a\low approval 

increases? Have any been because of "ratc that requested The Department denied or modified? shock" and an 11.4%. 

atypical spike in did not find sufficient claims supporting infonnation that the rate increase, would be it in a 

The Department position to 

denied a 10.0% disapprove any 

rate increase after filing. 

the actuarial 

opinion 

determined that 

the company's 

allowance for the 

State's new 

o colonoscopy mandate was 

unreasonable. 

Thc Company 

amended its rate 

filing as 

recommended by the Department to 

a 1.0% increase. 

Have similar rate increases The range of rate Have not noticed Similar or Yes, similar Notably higher· 

been requested for the increases has differences in the slightly higher. trends. ranging [rom 3% 

individual market? been significantly rate increases for to 36.4%. 

lower. (0% and individual 

1.0%) products, but that 

could happen in 

In Catamount. the near future. One request was 

rates have not modified from 

increased for two 36.4% to 24%. 

years. Another was 

modified from 

27% to 8%. 

--- --- ------- ----