California insurer backs away from 39% hike

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- Anthem Blue Cross has withdrawn its request to increase premiums by as much as 39% for its California customers, citing provisions in the new health care reform law.

Under the Patient Protection and Affordable Care law, commercial insurers must maintain an 80% "medical loss ratio" for individual insurance policies beginning January 2011.

That means insurance companies must allocate 80 cents out of every premium dollar to providing health care to their customers, while the remaining 20 cents can be used to pay other expenses, including salaries, overhead, and profits.

In a statement released Thursday, Anthem, a unit of WellPoint Inc (WLP, Fortune 500)., said the decision to withdraw its rate request was taken "to meet our current understanding of this requirement in advance of the effective date."

Anthem said it plans to refile rate increases sometime in May.

The insurer said it will provide "adequate notice" to members regarding how their rates may be impacted by the refiling. In the meantime, rates for Anthem's individual members in California remain unchanged.

Kathleen Sebelius, secretary of the U.S. Health and Human Services Department, said the announcement was "good news" for Californians who could have been hit with "massive rate increases."

"Since these rate hikes were first announced, I have heard from countless Americans who have been stretched to the limit by high health insurance premiums," Sebelius said in a statement. Anthem's decision, she said, will provide "some much-needed temporary relief."

"As we implement the law, [we] will closely monitor the industry, and we will not hesitate to act to prevent exorbitant premium hikes," she said.

Anthem became a symbol in the acrimonious debate over health care reform when it announced the plan earlier this year to raise rates by as much as 39% for its 800,000 customers in California.

Critics say Anthem and other insurance companies want to raise rates to help boost profits. But the insurance industry argues that rate hikes are necessary to cope with lost revenue as more of their customers either dropped insurance or downgraded to cheaper plans during the recession.

Brian Sassi, chief executive of WellPoint's consumer business unit, said Anthem's decision to withdraw its rate request was in "the best interests of our customers."

"Our goal is to make health care reform work for our members," he said.

President Obama signed the Patient Protection and Affordable Care Act into law in March. The law, which goes into effect over the next four years, aims to provide health care for 95% of Americans. To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,408.54 -16.31 -0.10%
Nasdaq 4,095.52 9.29 0.23%
S&P 500 1,864.85 2.54 0.14%
Treasuries 2.72 0.08 3.19%
Data as of 2:36pm ET
Company Price Change % Change
Bank of America Corp... 16.15 0.00 0.00%
Facebook Inc 58.94 0.00 0.00%
General Electric Co 26.56 0.00 0.00%
Cisco Systems Inc 23.21 0.00 0.00%
Micron Technology In... 23.91 0.00 0.00%
Data as of Apr 17
Sponsors

Sections

Spencer has been a supporting member of the "Good Morning America" cast for the past three years. More

Obamacare sign ups hit 8 million, though final enrollment remains to be seen. More

Office for iPad move is a symbolic victory for Nadella's Microsoft, but the company is still weighed down by many of the same old issues. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

As Detroit moves closer to reaching a bankruptcy deal, retired civilian workers are poised to be left worse off than firemen and police officers. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.