Troubles Continue for California Anthem With Notice of State Violations

Anthem Blue Cross of California has not only been held up as the White House's chief example of abusive health premium increases, but it's now the subject of an examination by the state's insurance department regarding violations of California insurance law.

Insurance Commissioner Steve Poizner said a California Department of Insurance investigation of Anthem has uncovered more than 700 violations of state law in the company's claims handling practices -- an outcome that could lead to millions of dollars in fines.

Most of the violations involved alleged delays in paying claims, though 143 of them were because of "failure to respond to the CDI in reasonable time so we can investigate complaints," and others were noted as "misrepresenting facts or policy provisions to insureds" or "unreasonably low settlement offers." For this market conduct examination, the state had looked at complaints filed from 2006 to 2009 against Anthem, which is a subsidiary of WellPoint Inc. (NYSE: WLP).

In a statement, Anthem spokeswoman Kristin Binns said it takes the issue "very seriously. As the largest insurer in California, our responsibility is to pay the many millions of claims on behalf of our members each year fairly, fully, and promptly. While this review represents a small fraction of those claims, it is nonetheless very important to us to make sure we take any corrective action that may be necessary."

This investigation announced by Poizner, who is running for governor this year, comes on the heels of nationwide criticism of Woodland Hills-based Anthem's recently announced premium increases -- from critics like Health and Human Services Secretary Kathleen Sebelius and President Barack Obama.

The U.S. House Subcommittee on Oversight and Investigations has asked WellPoint President and Chief Executive Officer Angela Braly to appear before a Feb. 24 hearing (BestWire, Feb. 17, 2010).

In a letter sent earlier this month to Anthem's President Leslie Margolin, Sebelius questioned premiums that are reportedly rising as much as 39% in some cases. "These extraordinary increases are up to 15 times faster than inflation and threaten to make health care unaffordable for hundreds of thousands of Californians," Sebelius wrote (BestWire, Feb. 8, 2010).

Poizner's office had also recently secured an agreement from Anthem to postpone the rate increases that had drawn so much attention. When the company agreed to the delay, Brian A. Sassi, president and CEO of the Consumer Business Unit ,said in a statement: "Anthem 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. Our decision to agree to postpone the rate adjustment does not change the underlying issue. 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."

Most WellPoint insurers have current Best's Financial Strength Ratings of A (Excellent).

Shares of WellPoint were trading in late afternoon trading on Feb. 23 at $59.06, down .57% from the previous close.

(Jesse A. Hamilton, Washington bureau manager: [email protected])