February 24, 2010 / 4:54 PM / 7 years ago

UPDATE 2-WellPoint CEO defends rate hikes as pressure grows

* WellPoint's Braly: increase unfortunate but necessary

* HHS Secretary invites WellPoint, others to meeting

* Senate Finance committee also lauches inquiry

* Shares close up nearly 2 percent (Adds Senate, HHS queries, quotes, 2010 forecast)

By Susan Heavey

WASHINGTON, Feb 24 (Reuters) - The head of the United States' largest health insurer, WellPoint Inc WLP.N, rejected charges on Wednesday that it was raising premiums to "squeeze" consumers in the name of profit as lawmakers and the Obama administration further pressured the industry.

Separately, the U.S. health secretary called the chief executives of WellPoint and other top insurers to a meeting to discuss premium costs. The Senate Finance Committee also launched an inquiry into the insurer and some of its rivals.

Democrats are attempting to ratchet up pressure on the industry as part of their fight to push larger healthcare reforms, but Wellpoint's Chief Executive Angela Braly cooly countered charges at a congressional hearing that was milder than much of the nation's healthcare debate thus far.

Braly said recent rises in premiums, as high as 39 percent for certain individuals, reflect higher costs from hospitals, doctors and drugmakers, and criticized lawmakers' plans for doing little to tackle other industries.

"Insurers are among the least profitable part of the healthcare system," Braly told a U.S. House of Representatives Energy and Commerce Committee oversight panel.

WellPoint reported fourth-quarter net income of $2.74 billion, or $5.95 a share in January. Excluding gains from the sale of a unit and other items, earnings were $1.16 a share. Analysts had expected on average $1.02 a share, according to Thomson Reuters I/B?E/S.

The company forecast earnings of $6 per share for 2010.

WellPoint had to raise premiums for some California customers in its Anthem Blue Cross plan to cover higher charges from healthcare providers at a time when more consumers are dropping coverage because of the tough economy, she said.

"Unfortunately, the leading proposals being discussed in Washington don't do enough to control costs," said Braly. Other industries "need to be called upon to reduce these costs."

But Democrats, pointing to a committee review of more than 3,000 company documents, accused WellPoint of cushioning its premium increases to benefit executives and the company's bottom line.

"You're raising your rates far above what's necessary, trying to squeeze every dollar of profit you can out of policyholders in California and across the nation," said committee chairman Henry Waxman, a California Democrat.

The hearing comes as Democrats try to revive stalled legislation to overhaul the nation's $2.5 trillion healthcare system.

On Thursday, Democratic and Republican leaders will meet with President Barack Obama in an attempt to break lawmakers' impasse and move toward a final bill.

Separately, U.S. Health Secretary Kathleen Sebelius called for Braly as well as the chief executives of Aetna (AET.N), UnitedHealth Group (UNH.N) and Cigna (CI.N), among others, to meet with her March 3 to discuss premiums as well as larger reform efforts.

The Senate Finance Committee's top Democrat and Republican also launched an inquiry into WellPoint's rates, sending a letter to the company as well as others - including Aetna and Health Net Inc HNT.N offering plans in California, the nation's most populous state.

A WellPoint spokeswoman said the company would review the letters. Other insurers said they were either reviewing the letters, had not yet received them or could not be immediately reached.

Current congressional bills aim to expand insurance to roughly 30 million more Americans while cracking down on industry practices such as denying policies over pre-existing health conditions or imposing lifetime coverage limits.

House Democrats cited WellPoint's practices as a case-in-point, saying e-mails and other documents showed a close relationship between the rate hikes and profits.

Company representatives said the documents where part of a planning process, not actual proposals.

WellPoint, which has more members than any other U.S. insurer, is not the only health insurer to raise rates for individuals who buy their own policies rather than get coverage from their employers or government-run programs, but it has become Democrats' top target.

Obama's plan, released on Monday, aims to bridge separate House and Senate bills and would give the federal government a greater role over insurance premiums.

Republicans called the hearing political theater ahead of Thursday's White House meeting to discuss the president's proposal.

"If it was a popular bill ... if it was a good bill, we would not be sitting here today," Republican Representative Phil Gingrey said. "The American people simply do not want the Obama plan."

Braly also echoed concerns with Democrats' measures, citing deals Democrats made with pharmaceutical companies, hospitals and other groups that limit the ability to hold down costs.

Braly, a 48-year-old Texan whose policy experience was hailed when she took over in 2007, calmly answered lawmakers' questions.

Wall Street analysts have said the hearing is unlikely to have much direct impact on WellPoint since insurers are currently regulated by the states.

After the hearing, its shares closed up nearly 2 percent at $60.14 compared with a 1 percent rise for the wider market.

Still, testimony from her and others put a public face on a controversy so far painted in percentages.

Lauren Meister, an Anthem Blue Cross customer for 17 years, told lawmakers her monthly premiums have risen by hundreds of dollars, but having asthma prevents her from finding another provider.

"My issue with Anthem is shared by many, and is just a symptom of an unhealthy, broken system," the 50-year-old West Hollywood, California, resident said. (Additional reporting by Lisa Richwine in Washington and Lewis Krauskopf in New York; Editing by Simon Denyer, Lisa Von Ahn, John Wallace and Leslie Gevirtz)

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