Consumer Watchdog Also Warns Against Insurer-favored 'Cost Solution': Selling Policies That Amount To 'A Cardboard Box to Replace Our Apartment"

WASHINGTON, Feb. 9 /PRNewswire-USNewswire/ -- Blue Cross has opened an opportunity for lawmakers and regulators with its premium hikes of up to 39% in California, said Consumer Watchdog. In the face of questions from the White House and an investigation by California's insurance commissioner, federal and state lawmakers should act to regulate health insurance premiums and force insurers to defend every increase.

In recent letters to policyholders announcing yearly premium hikes of up to 39% and perhaps higher, Anthem Blue Cross of California says it is "necessary to adjust our rates to cover the escalating cost of health care." Consumer Watchdog, noting that a 39% increase is 1,500% above the rate of consumer inflation, said the insurer was simply gouging policyholders to raise profits in the face of a sinking customer base.

"Insurers are reaping profits like it's 2007 while their policyholders continue to lose income, savings and security," said Jerry Flanagan, health policy director of Consumer Watchdog. "The companies need to be brought under control, but instead they are lobbying to be allowed to sell so-called national policies that cut benefits and evade state regulation. That's like offering to rent us a cardboard box when we can no longer afford an apartment."

The California Blue Cross unit is the current focus of anger at insurers, drawing protests from the federal Department of Health and Human Services, from President Obama himself and the state Insurance Commissioner. But it is not an isolated incident. Small businesses nationwide received notice of 15% to 20% premium increases last fall from multiple insurers, and this year's jump in individual Blue Cross policies follows outsized increases last year. At the same time, the parent company of Anthem Blue Cross lost nearly 4% of its customers in 2009, while posting profits above 2008's.

"The only way Blue Cross can keep up its profits as its customers drop away is by using outrageous premium hikes to make up the difference," said Flanagan. "If Blue Cross made washing machines it couldn't get away with that. They have Americans over a barrel because it's their health care at stake, and a few companies control most markets."

In response to these unjustified rate spikes, the White House and Congress should embrace "prior approval" regulation of health care rates.

Consumer Watchdog, which pioneered the most successful insurance premium regulation law in the nation, said that strong "prior approval" regulation, requiring full disclosure and regulatory assent before rate hikes go into effect, should be extended to health insurers in every state. Such regulation has saved drivers in California $62 billion on auto insurance rates since 1988, and similar savings would be expected for health insurance rates.

For more information about prior approval regulation, go to: http://www.consumerwatchdog.org/insurance/

Consumer Watchdog is a nonpartisan consumer advocacy organization with offices in Washington, D.C. and Santa Monica, CA. Find us on the web at: http://www.ConsumerWatchdog.org

SOURCE Consumer Watchdog

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