WASHINGTON, Feb. 9, 2010— -- The Obama administration is demanding answers from California's largest insurance firm, Anthem Blue Cross, about why the company is suddenly raising premiums on some customers by up to 39 percent; more than 10 times the rate of inflation.
Nearly a million Californians with individual insurance plans have received letters from the company notifying them of the rate hike, which, some customers said, makes their insurance unaffordable.
"I really can't afford to spend $9,000 a year on health insurance," San Francisco attorney Pamela Fasick said of her policy premiums scheduled to increase 28 percent March 1.
"I would hate to give up insurance at this point in my life, but I wouldn't be able to pay that money out of my income without going into debt," she said.
Health and Human Services Secretary Kathleen Sebelius has insisted that the company justify the rate increase in detail to her agency. "We need to make sure that companies are spending their money on health claims, not on overhead costs," she said.
Anthem Blue Cross's parent company, Wellpoint Inc., earned a record $2.7 billion in profits for the last quarter of 2009. Its quarterly sales grew to $19 billion, up 26 percent from $15.1 billion in the comparable 2008 period, Sebelius pointed out.
The U.S. Health and Human Services Department and the California are investigating the rate increase, although their ability to reverse the company's decision is unclear.
In a statement, Anthem Blue Cross attributed the increased premiums to a bad economy and rising health care costs, forcing members to drop coverage, which "leaves fewer people, often with significantly greater medical needs, in the insured pool."
Company, Administration: Rate Hikes Show Need for Overhaul
Anthem Blue Cross' premium hikes are just another example of why health care overhaul is needed, Sebelius and the White House said.
The company said an overhaul is needed but that the president and Congress need to begin anew to craft the legislation.
"People are scared to death," said Rep. John Garamendi, D-Calif. "They're losing their jobs, they know they're going to lose their group plans. ... they're nervous and they're upset."
The news comes on the heels of a new government estimate that health care consumed a record 17.3 percent of all spending in the U.S. economy last year.
ABC News' Devin Dwyer contributed to this report.