February 26, 2010 / 1:44 AM / 8 years ago

California health insurers subpoenaed in rate probe

LOS ANGELES (Reuters) - California Attorney General Jerry Brown on Thursday subpoenaed financial records and other documents from the state’s seven largest health insurance companies as part of a widening investigation of the industry.

Brown said his office was looking into “possibly illegal practices” among state health insurers and is “very concerned that some of them are unjustly raising premiums and denying payment of legitimate claims.”

The action by Brown, who is expected to officially launch a campaign for governor in the next few weeks, comes as sharp rate hikes instituted or planned by several leading California insurers drew national attention.

California’s biggest for-profit health insurer, Anthem Blue Cross, said earlier this week it would go forward with plans to raise its premiums for some individuals by up to 39 percent, despite criticism from the Obama administration.

The White House and congressional Democrats seized on Anthem’s proposed rate hikes as part of their strategy to boost support for revamping the U.S. healthcare system, the subject of a bipartisan policy summit in Washington on Thursday.

New regulation of health insurers was a key part of the overhaul plan President Barack Obama announced on Monday, and the U.S. House of Representatives voted on Wednesday to end the industry’s 65-year-old antitrust exemption.

The head of Anthem’s parent company, WellPoint Inc, appeared on Capitol Hill on Wednesday to defend its rates, rejecting charges that it was raising premiums to “squeeze” consumers in the name of profit.


Industry executives say rising premiums reflect soaring costs of delivering medical care and the exodus of many healthy consumers from the ranks of policyholders.

But Brown said the rate increases were “devastating to Californians strapped by the economy (and) in some cases, they are possibly illegal.”

“Our best attorneys are going to get to the bottom of this, and where we find violations of California’s unfair business laws, we intend to stop them,” he said.

California Insurance Commissioner Steve Poizner, who is seeking the Republican nomination for governor, recently retained an outside actuary to examine the company’s rates.

Separately, Poizner said this week that a review by his office found more than 700 violations of state law in the way Anthem has processed insurance claims over the past four years, including excessive delays in paying those claims.

The subpoenas from Brown build on an investigation opened in September into the practices of health maintenance organizations (HMOs).

That probe followed a California Nurses Association report, based on industry data, showing that the state’s leading health insurers had collectively rejected one in five medical claims from 2002 through the first half of 2009. PacifiCare, a unit United Healthcare Group, had the highest denial rate — 39.6 percent — according to the study, .

Industry officials assert those figures are misleading because many denials stem from paperwork problems, such as duplicated claims. They say the rejection of a claim does not mean treatment of a patient was denied, and that many claims initially rejected are ultimately paid.

In the case of HMOs, which cover 21 million Californians, network doctors and other providers are paid a flat fee for each member, so the vast majority of services involve no claims at all, industry spokeswoman Nicole Evans said.

The seven companies covered by the subpoenas — Aetna Health, Anthem Blue Cross, CIGNA, Health Net, Blue Shield of California, Kaiser Permanente and PacifiCare — were given 30 days to turn over the records sought.

The subpoenas served on Thursday cover the companies’ pay-for-service health plans. Brown said he subpoenaed the same firms last month for documents related to their HMO plans.

Patrick Johnston, president of the California Association of Health Plans, said health care in the state was being provided “in a well-supervised regulatory environment.”

“In 1975, then-Governor Jerry Brown signed legislation that transferred the regulatory authority for health plans from the attorney general to the Department of Corporations, which has evolved into the Department of Managed Care,” Johnston said.

Editing by Dan Whitcomb and Paul Simao

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