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New jolt for healthcare reform? Insurer hikes rates 39 percent.

Democrats are using the decision of WellPoint to raise rates for some customers by as much as 39 percent – despite a $4.75 billion profit – to rally supporters.

By Staff writer / February 11, 2010

Health and Human Services Secretary Kathleen Sebelius testified on Capitol Hill in Washington on Feb. 3. Sebelius said Thursday that 'it remains difficult to understand' how such premium increases could be justified when WellPoint reported a $4.75 billion profit in the last quarter of 2009.

Susan Walsh/AP

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Washington

Has a cost hike by a health insurer in California given new life to the Democratic healthcare-reform legislation in Washington?

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Maybe not directly. But the decision by WellPoint to raise rates for some California customers by as much as 39 percent has given top Democrats a perceived villain they can rally supporters against.

Calling the WellPoint decision “reckless,” Senate majority leader Harry Reid (D) of Nevada on Thursday said it showed why healthcare reform is needed.

“We don’t have to let greedy health-insurance executives drag down our future,” Senator Reid said.

President Obama made a similar point, using less-harsh language, at his Tuesday press conference. Kathleen Sebelius, secretary of Health and Human Services, said Thursday that “it remains difficult to understand” how such premium increases could be justified when WellPoint reported a $4.75 billion profit in the last quarter of 2009.

Earlier this week, Secretary Sebelius ordered a federal probe of the increase. A subcommittee of the House Committee on Energy and Commerce scheduled a hearing on the rate hike for Feb. 24, and it asked WellPoint’s chief executive officer, Angela Braly, to appear.

Mr. Obama has asked Republicans to join him and Democratic leaders in a televised conference on healthcare on Feb. 25.

WellPoint defends the hikes as a prudent business move. In a letter to Sebelius, Brian Sassi, head of WellPoint’s consumer business unit, said that because of the recession, healthy people are dropping insurance or opting for cheaper plans. That lowers premium revenues, reducing the amount of money available to cover claims from those who remain.

WellPoint overall may have made money, but the unit that sells individual policies to people who don’t get insurance through employers lost money, Mr. Sassi said.

In addition, he said, insurance rates are going up because health costs are continuing to rise.

The increase is probably actuarially defensible, writes health-insurance industry consultant Bob Laszewski in his popular health-policy blog. But it is also a real-life example of what happens when national healthcare spending takes up a bigger and bigger share of the economy.

“When the day is done this probably says more about why systemic health care reform is so critical than about any one company’s behavior,” writes Mr. Laszewski.

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