WellPoint chief executive to defend planned rate hikes

The chief executive of WellPoint Inc., the nation's largest health insurer, is being called before Congress this week to defend planned rate hikes of as much as 39 percent for some customers even as the company made billions last year.

The issue bubbled up this month as notices about premium rate increases for the individual health insurance business of WellPoint's Anthem Blue Cross subsidiary in California were widely publicized. Similar increases are being seen by policyholders in a handful of states.

The Obama administration has seized on the issue to renew its push for a health care system overhaul.

At the heart of the debate is the question of what should be a fair profit for health insurers. WellPoint executive Angela Braly is likely to be grilled on that when she appears Wednesday at a congressional hearing.

The Indianapolis insurer made about $4.7 billion in 2009, a total stoked by the $2.2 billion it received from the sale of a pharmacy benefits management subsidiary. Outside that, WellPoint made most of its money through employer-sponsored group health insurance. It reported $2.4 billion in operating profit from that segment last year, which amounts to about 58 percent of its total earnings.

The insurer said it gets only about 10 percent of its operating income from individual health insurance like the kind it sells in California.

WellPoint says it lost millions last year on the individual health insurance policies it sells in California after underestimating the premiums it needed to collect to pay claims.

Also, WellPoint said hospital costs are rising an average of 10 percent a year and pharmaceutical costs are up 13 percent, and that must be factored into pricing.