Feb. 24, 2010 -- Members of the House today ripped WellPoint Inc., owner of Anthem Blue Cross, for hiking insurance premiums and blaming the rate increase on tough economic times even as the company gave executives hefty compensation and organized lavish retreats.
Earlier this month, Anthem abruptly announced it would raise premiums on more than 1 million customers in California by as much as 39 percent, more than 10 times the rate of inflation.
"Corporate executives at WellPoint are thriving, but its policyholders are paying the price," said Rep. Henry Waxman, D-Calif., chairman of the House Energy and Commerce Committee, in his opening statement.
"Health insurers like WellPoint may get richer, but our nation's health will suffer," Waxman added. "We cannot go down this road forever. It is breaking our middle class. And it will bankrupt our nation."
A study released today by the Center for American Progress Action Fund showed WellPoint, which insures more Americans than any other company, is pushing double-digit premium hikes in 11 states across the country.
WellPoint President Angela Braly blamed the economy and higher health care costs for the rate hike. She told lawmakers that the company lost $10 million on insurance for individuals in 2009, and cited increasing hospital costs as one of the reasons behind the high insurance rates.
"Less than a penny goes to health care profits. What are we going to do about the other 99 cents?" Braly said. "Insurers are among the least profitable parts of the health care system. The elephant in the room is the growth of health care spending. We are the tail on the elephant."
Lawmakers were hardly sympathetic, citing expensive corporate retreats and exorbitant salaries. Braly said she earns $1.1 million per year in addition to $8.5 million in stock compensation plus bonus. Documents obtained by the committee showed that WellPoint spent $27 million on company retreats in 2007 and 2008 at lavish resorts.
House members also accused Anthem executives of focusing on profits at the expense of their customers.
"I think a 39 percent rate increase at a time when people, Americans, are losing their jobs, losing their health care is so incredibly audacious, so irresponsible," said Rep. Jan Schakowsky, D-Ill.
WellPoint's profits last year totaled $4.2 billion. Braley said the profit was the result of an asset sale.
The company said its profit margin of about five percent is reasonable and relatively low, compared to the rest of the health care sector. WellPoint's profit margin was considerably lower than pharmaceutical firms, biotech firms and about the same as community hospitals.
Some customers say the insurance premium hike makes it virtually impossible for them to afford coverage.
Julie Henrickson, a self-employed mother of two, got a letter from WellPoint saying her premium this year was going to go up by $310 a month.
"If I were to accept this new monthly premium of $1,352, thereby retaining my same current policy, this amount would be shy just $92 of my monthly home mortgage payment," Henrickson told lawmakers. "In this economically depressed environment, I find the fact of Anthem Blue Cross raising premium costs to individual policy holders by such high amounts truly unconscionable."
"If Anthem goes ahead with its desired rate increases," Anthem customer Jeremy Arnold of Los Angeles told lawmakers, "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."
Another customer Lauren Meister of West Hollywood, Calif., said all she's looking for is affordable insurance.
"I don't want to spend the next 15 years of my life looking forward to being 65 so I can get Medicare," Meister said.
Health Care a Hot Topic This Week in Washington
Today's hearing comes in advance of Thursday's bipartisan health care summit called by President Obama.
"Tomorrow, I look forward to a good exchange of ideas at the Blair House with some of the legislative leaders," the president said today in addressing the Business Roundtable. "And I hope everyone comes with a shared desire to solve this challenge, not just score political points."
Obama, following a suggestion by Sen. Dianne Feinstein, D-Calif., has proposed giving the Health and Human Services secretary the power to block an insurance company's premium increases if they don't meet certain criteria.
The proposal would have HHS yield to local officials in the 27 states where insurance commissioners already have the power to regulate premium hikes.
Republicans have objected to the proposal, saying the government needs to focus on the core cause of expensive insurance, which is rising health care costs.
A government report released last week said hikes such as those in California are not uncommon. According to the report, Anthem of Connecticut requested a 24 percent rate hike in 2009, Blue Cross/Blue Shield of Michigan requested a 56 percent rate increase last year and Regency Blue Cross Blue Shield of Oregon a 20 percent premium increase.
"The five largest insurers in America have declared more than $12 billion worth of profits in 2009," HHS secretary Kathleen Sebelius said last week. "[Anthem Blue Cross of California] alone posted a $2.7 billion profit in the fourth quarter of 2009, just a week before they filed for a 39 percent rate increase."
Sebelius has called executives of five top insurance companies -- UnitedHealth Group, WellPoint, Aetna, CIGNA and Health Care Service Corporation -- to meet with her next month about rate hikes.
After today's hearing on WellPoint, House members on another committee voted to repeal the antitrust law -- The McCarran-Ferguson Act of 1945 -- that health insurers currently enjoy.
Obama and some Democrats argued that the law should be repealed to increase competition, but critics argued that it wouldn't have any impact in bringing down health costs, which are the core issue.
Repealing the act "will protest us from the Anthems of the world," Rep. Lynn Woolsey, D-Calif., said on the House floor.
ABC News' Thomas Giusto, Jake Tapper and Jonathan Karl contributed to this report.