Anthem becomes Obama's Exhibit A for health-care reform

Mar 9, 2010 — Los Angeles Times

By Mark Z. Barabak and Duke Barabak

Mar. 9, 2010 (McClatchy-Tribune News Service delivered by Newstex) -- On a warm Friday in early November, California's largest for-profit health insurer submitted a request to regulators in Sacramento. Anthem Blue Cross was seeking double-digit rate increases for many of its 800,000 individual policyholders.

Company executives had little reason to worry. Insurers can raise premiums in the individual market as often _ and as much _ as they like, within certain guidelines. For years, such requests were routinely approved. They rarely made news.

In Washington, Democrats were scrambling to pass sweeping health-care legislation, the centerpiece of President Obama's domestic agenda and a dream of party leaders for more than half a century. The day after Anthem's filing, the bill passed the House on a cliff-hanging vote. Weeks later, the measure passed the Senate without a vote to spare.

There was still plenty of work ahead, but, finally, after months of ups and downs _ after rowdy town hall meetings, backroom deals and back-to-the-wall presidential speeches _ it looked to Democrats as though victory was in sight. That would soon change.

The same day as the Senate vote, Anthem received some brief questions from the California insurance commissioner's office. The follow-up involved minor details; there were no questions about the rate hikes themselves, which ranged up to 39 percent for some Anthem customers.

By late January, word of the increases was trickling into mailboxes across California, surprising policyholders just as the politics of health care had radically shifted. The overhaul legislation, if not dead, was in serious trouble.

Unwittingly, Anthem helped revive Democratic efforts. Every letter it sent out was a political gift for Obama. The only thing missing was a shiny red bow.

Each morning, White House officials wake up to a news summary, a stack of clippings printed and neatly stapled to offer a headlined view of the world. On Feb. 5, snow was falling in Washington, and the health-care bill, for all intents, was in deep hibernation.

Two weeks earlier, Massachusetts Republican Scott Brown won a stunning upset in a special election to replace the late Sen. Edward M. Kennedy. Democrats were humiliated. Even worse was seeing an avowed foe of Obama's health-care legislation succeed Kennedy, whose dying wish was to expand insurance coverage to tens of millions of Americans.

Brown's victory gave the GOP the crucial 41st vote needed to block final passage. Obama decided a summit between Democrats and Republican to hash out _ or at least argue over _ their differences was his last and best shot at prevailing.

"The president's view was that we can't let health care die on the vine, or stay in limbo," said Dan Pfeiffer, a senior White House strategist. No one was likely to switch positions. But a show of reaching out would offer some cover should Obama, lacking bipartisan support, try to muscle the bill through Congress with only Democratic votes.

Plans were underway to announce the summit as Pfeiffer thumbed through the White House news summary for Feb. 5. One story leaped out: a Los Angeles Times article that described people outraged over Anthem's plans "to dramatically raise rates." Pfeiffer, who helps formulate and drive the president's message, flagged the article for others in the White House. Many had already read the piece. The president's political team immediately saw what Anthem had done: The company had given Obama, who struggled for months to find a cogent argument, a simple way to crystallize his case for change.



Much of the debate over the health-care overhaul was esoteric _ what's the difference between a cooperative and a health-care exchange, anyway? For many Americans, the whole issue seemed irrelevant. After all, most have insurance, and polls suggest that many, if not entirely satisfied, are happy enough with the system as it is.



Obama and his allies had been arguing, not very successfully, that doing nothing had a price, that rising health-care costs would cripple the economy and rising premiums would eventually force many of the insured to drop their coverage. Anthem's whopping rate increases were an example the White House could cite and _ better still _ something people could easily understand.

Most Americans had never heard of Anthem, much less the impending rate hikes. The White House was determined to change that.

When Anthem submitted its 70 pages of filings to the office of Insurance Commissioner Steve Poizner, executives at the company and its corporate parent, WellPoint Inc. (NYSE:WLP) , expected some customer complaints but not a huge outcry. The rate increases, averaging 25 percent, would affect only a small part of California residents. Most of the insured receive coverage through their employer.



Individual policies are usually bought by those uninsured at work, self-employed or ineligible for Medicare or Medicaid. About 2.5 million Californians, out of 37 million, have such policies. About a third are covered by Anthem.

California allows increases in the individual market so long as insurers spend at least 70 cents of every premium dollar on health care. Officials at Anthem, headquartered in Woodland Hills, Calif., believed there were sound economic reasons for raising individual rates. The costs of doctors, hospitals, medical devices and prescription drugs were soaring. Younger and healthier people have dropped or reduced their insurance, leaving Anthem older, sicker and thus more expensive customers to cover.



So it came as a shock when a seemingly routine business decision exploded into a national news story. Even more shocking was the fact Obama himself was fueling the controversy.

On Super Bowl Sunday the president appeared on CBS, chatting with Katie Couric. Her first question was about health care and within seconds Obama was criticizing Anthem.

"One of the major insurers in California just announced that in the individual market they're increasing their premiums by 39 percent," Obama said, three days after the story broke. "That's a portrait of the future if we don't do something now."

Obama would hammer that point again and again. "The other week, men and women across California opened up their mailboxes to find a letter from Anthem Blue Cross," he said in a radio broadcast days before the healthcare summit. "The news inside was jaw-dropping."

For months, Obama had been on the defensive, facing electoral setbacks, declining poll numbers, dissident Democrats and stories that highlighted the deal-making often needed to grind out legislation. Finally, the administration felt it was on offense.



"BIG insurance rate increases and MORE coming," White House Press Secretary Robert Gibbs wrote on his new Twitter account, linking to coverage of the Anthem story. Kathleen Sebelius, the secretary of Health and Human Services, sent a letter to WellPoint, challenging the increases, and summoned industry executives to the White House to explain themselves. Obama paid a surprise visit to the meeting, bearing a letter from an Ohio cancer survivor complaining her premium was rising more than 40 percent this year. Obama said he planned to carry the letter to public events to remind people of the stakes in health-care reform.



The administration seized upon a proposal by California's Democratic Sen. Dianne Feinstein and made it part of the overhaul legislation: The provision would give the federal government the power to block rate increases that were deemed excessive.

Democratic Rep. Henry Waxman, D-Calif., hauled WellPoint's chief executive, Angela F. Braly, before an investigative panel and forced her to defend Anthem's actions, a scene that recalled the ritual roasting of tobacco industry executives. "We timed it the day before the summit," Waxman acknowledged, to give momentum to the president's effort.

In the House, lawmakers passed a bill to strip insurance companies of their exemption from federal antitrust laws. The measure was mainly symbolic because states already regulate health insurers to prevent collusion.

But the vote, 406-19, sent an emphatic message.

Kristin Binns is WellPoint's chief spokeswoman. Since news of the rate hikes broke, Anthem and WellPoint executives have received hate mail and death threats. "The last three weeks," she said, "have been like three years."

Karen Ignagni, the head of America's Health Insurance Plans, the industry's Washington trade group, can barely contain her anger. She says Obama and Democrats have reduced the health-care debate to a few manipulative sound bites. "Vilification sells in politics," she said. "Find an enemy. Go for it."

Anthem's increases are on hold until May 1, pending a review by state regulators. Congressional investigators have ordered the heads of four of the nation's largest for-profit insurers to appear later this month to explain their business practices. Feinstein has introduced a bill, separate from Obama's, to make it tougher for insurers to raise rates.

The president wants final passage of health-care legislation in the next few weeks, with or without Republican support. Approval in either house remains far from certain. But chances look better than they did before Anthem began notifying its policyholders of its rate hikes.

"This was a huge stone in a still pool," said Gibbs, "and the ripples are still being felt."

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Mark Z. Barabak reported from Washington, Duke Helfand from Los Angeles.

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Newstex ID: KRTN-1429-42699599