Anthem Blue Cross Should Reimburse California Man for Transplant, Jury Decides

LA Times

The insurer had refused to cover the liver surgery after Ephram Nehme decided to go out of state to face a shorter waiting list. Panelists in L.A. also say Blue Cross should pay Nehme's legal fees.

A Los Angeles jury concluded Monday that Anthem Blue Cross should cover the cost of an out-of-state liver transplant that a California man paid for after the insurer balked.

In addition, the jury ordered Blue Cross to pay plaintiff Ephram Nehme's legal expenses, which could dwarf the $206,000 cost of the transplant.

Blue Cross approved Nehme's liver transplant in late 2006, and he was on the waiting list at UCLA Medical Center. But the company refused to pay when Nehme, gravely ill and fearing for his life, decided to have the liver surgery in Indiana, where wait times are far shorter than in California.

The jury, which included at least three members with Blue Cross medical coverage, voted 10 to 2 that the company breached its contract with Nehme. It voted 9 to 3 that the health insurer acted in bad faith by refusing to pay for the out-of-state operation. The panel deliberated for less than two days.

"The message here is that you can't take people's money, promise to protect them, and then leave them to die in their time of need," said Nehme's lawyer, Scott Glovsky.

At a hearing set for next week, Glovsky said he would seek to broaden the jury's verdict under the state's unfair competition law. He will ask Superior Court Judge Kenneth Freeman to order Blue Cross to allow its California members to pursue organ transplants in St. Louis and at hospitals nationwide that do business with its parent, Indianapolis-based WellPoint Inc., the nation's largest health insurer.

In a statement, Blue Cross acknowledged "the jury's determination that Mr. Nehme's transplant should have been approved by Anthem Blue Cross despite the fact that Mr. Nehme's Anthem Blue Cross contract states that transplants must be performed only at California Centers of Excellence."

"While we disagree with the jury's coverage determination, we are pleased that the jury did not award punitive damages and unanimously concluded that Anthem Blue Cross did not act with any malice toward Mr. Nehme," the company said.

A spokeswoman said the company had not decided whether it would appeal.

Blue Cross also said it offered to settle the case with Nehme several months ago for more money than the jury awarded.

"It is unfortunate that the time spent by the jury and the considerable costs of this trial could have been avoided," the company said in its statement. Meanwhile, the price tag on a California health insurance quote has risen out of sight for many consumers.

Nehme, a 62-year-old produce merchant and grandfather, said the case was not about money. Before the trial began he pledged to donate any winnings to liver research.

Nehme said he saw the suit as a way to pressure Blue Cross to stop denying out-of-state transplants, adding that he was particularly concerned about patients who could not afford to pay out of pocket.

"I'm trying to save lives," Nehme said when the trial began Feb. 22. "There are a lot of people who need liver transplants and kidney transplants, and they should be able to get them wherever they need them."

Nehme's liver began to fail in 2006, and he was placed in line for a transplant at UCLA. Blue Cross readily approved the procedure at the hospital, which is part of its contracted network.

But Nehme's condition rapidly deteriorated, and his UCLA physician urged him to go to the Clarian Transplant Center for surgery in Indianapolis, where he had sent other patients.

At the time, the median wait time for livers at UCLA was more than two years. At Clarian, an Indiana University-affiliated hospital, the wait time was about six weeks.

When Blue Cross refused to pay, Nehme went anyway and picked up the cost of the January 2007 operation.

He recovered and returned to work as the owner of produce markets in the Simi and San Fernando valleys. His suit contended that Blue Cross denied the Indiana transplant to save money.

The verdict arrives as President Obama, stumping for healthcare reform, has been railing against insurance company denials of medical treatment, recalling his mother's fights with an insurer when she had cancer.

It also comes amid growing outrage over premium increases imposed by Blue Cross and other insurers. Nehme's premium, for example, increased 50% March 1 to $1,500 a month.

Insurer Blames Health Costs for California Rate Hikes

LA Times

WASHINGTON-- The head of the major health insurer that wants to boost rates in California by up to 39 percent defended her company before Congress on Wednesday, saying the increases would be tough for many customers but were necessitated by soaring medical costs.

In prepared testimony for a House investigative subcommittee, Angela Braly, president of WellPoint Inc., blamed the increases on the growing price tags for hospital care and pharmaceuticals. She also cited the ailing economy, which has caused many younger, healthier people to save money by dropping coverage, leaving her company covering an older, sicker population.

"Raising our premiums was not something we wanted to do," Braly said. "But we believe this was the most prudent choice."

WellPoint owns Anthem Blue Cross, whose plan to boost rates in California has made it a poster child for Democrats arguing that the nation's health system must be overhauled. Wednesday's hearing comes a day before President Barack Obama hosts bipartisan congressional leaders for a daylong, televised discussion of health care, a session he hopes will provide new momentum to Democrats' stalled legislation.

It also was occurring the same day the House planned to vote on legislation repealing the health insurance industry's exemption from federal antitrust laws. Obama and Democrats say the measure would help spur competition, but analysts say it would have little impact on how insurers do business because they already are regulated by states.

Democrats on the House Energy and Commerce oversight and investigations subcommittee also invited some California residents to describe their experiences with Anthem.

In prepared testimony, Jeremy Arnold of Los Angeles said Anthem informed him last month that his rates would grow by 38 percent to $319 a month, which could force him to take a less expensive policy with higher deductibles and hope he doesn't get sick.

"Hope is not an adequate health care policy," Arnold said.

Braly expressed some sympathy.

"Clearly, we understand that rate increases create a challenge for many of our members," Braly said. "However, it is important to know that many of our members often have a choice of coverage."

She said the company was dismayed when the health overhaul debate in Washington turned into "an attack on the health insurance industry," which she said was "very misleading."

After its rate announcement generated criticism, Anthem said it was postponing the increase from March 1 until May 1 while it is reviewed by California regulators.

Anthem covers more than 8 million Californians, including about 800,000 who buy their policies directly. It is on those individually covered people that Anthem has proposed rate increases of up to 39 percent, though the company says the average increase is 25 percent -- which the company says is in line with competitors.

Braly said the company lost $10 million on individually insured Californians last year.

In a report earlier this month, the Obama administration cited WellPoint's reported profit of $2.7 billion in the fourth quarter of last year as evidence that insurers' rate boosts need to be curbed.

But Braly cited a one-time sale of an asset and said the profit excluding that was $380 million after taxes. She said even if the company returned that profit entirely to its customers, they would each receive an average $5.13 per month.

Braly said the rate increases and growing costs show why a health overhaul is needed. She said the Democratic bills debated so far have been inadequate because they don't control the growth of medical costs and thus the tilt in California health insurance quotes.

"Changing how we finance health care without changing how we deliver health care is simply not sustainable," she said.

In California, Exhibit A in Debate on Health Insurance

NY Times

A letter to Steven Mandel from Anthem details the rate change that is proposed for his policy.

LOS ANGELES — When Bernhard Punzet opened the dreaded envelope from Anthem Blue Cross one recent Saturday, it ruined his weekend.

Although he had no known medical problems, the company was raising the premium on his individual health insurance policy by 34 percent, to $254 a month. The policy for his partner, who is 12 years older, would rise 36 percent, to $369.

“Ten percent I could have rationalized,” said Mr. Punzet, 34, a financial controller for a Los Angeles recruiting firm. “But a 34 percent increase? I don’t even have any data points for that, nothing to compare it to. I’ve never seen anything go up 34 percent.”

With health care negotiations stalled in Washington, the Obama administration is seizing on the seething fury felt by Mr. Punzet and nearly 700,000 other Anthem customers in California who have received notices of increases that average 25 percent. About a quarter of them are seeing leaps of 35 percent to 39 percent, the company said, at least four times the rate of medical inflation.

At a moment when the health care debate seemed drained of urgency, the rate increases have permitted Mr. Obama to remind Americans of what is at stake, not just for the uninsured but for those whose coverage is threatened by unregulated hyperinflation.

The spike in Anthem’s premiums, Mr. Obama warned last week, were “just a preview of coming attractions” if the country failed to overhaul its health insurance system.

But if Anthem was the whipping boy the White House needed, the confrontation has also reinforced an emerging shift of focus in Washington from the need for universal coverage to the need for serious cost control. And it brought into clear relief the deep rift between the administration and the insurance industry concerning a central question: whether such unsustainable pricing is driven by the bloodless economics of risk or a corporate culture of greed.

Recognizing a no-lose proposition when they see one, politicians in Sacramento and Washington chastised Anthem relentlessly last week, and hearings are scheduled in both capitals. On Saturday, Anthem’s parent company, WellPoint Inc. of Indianapolis, agreed to a request from California’s insurance commissioner to delay the increases by two months, to May 1, so he could determine whether they comply with loss-ratio regulations.

Health and Human Services Secretary Kathleen Sebelius challenged the company to justify its “extraordinary” rate increases and, when it did in a five-page letter, volleyed that she was not satisfied. She expressed indignation that some of Anthem’s increases would be up to 15 times the rate of inflation, and that WellPoint had earned $2.7 billion in the fourth quarter of 2009.

“Too many Americans are at the whim of private, for-profit insurance companies who are raking in billions in profits each year,” Ms. Sebelius wrote on the White House blog.

She did not mention that most of WellPoint’s fourth-quarter surge came from the one-time sale of a business unit or that Anthem lost money on the individual market in California last year, as company officials assert. California’s insurance commissioner, Steve Poizner, said Saturday that he had a “healthy skepticism” about the claim.

Although Anthem, the state’s largest for-profit insurer, has seemed outmaneuvered by the White House so far, it has tried to transform its defensive position into a teachable moment.

In statements and letters, Anthem and WellPoint have explained what the industry calls a recessionary death spiral: as unemployment and declining wages prompt healthy people to drop their insurance, the remaining risk pool becomes sicker and more expensive to insure, which in turn forces up prices and pushes more people out of the market.

Bernhard Punzet, a financial controller, is an Anthem Blue Cross policy holder whose health insurance premium was increased by nearly 40 percent.

A study released this week found that the five largest health insurance companies collectively lost 2.7 million customers last year, including 1.4 million by WellPoint. Yet they reported record profits of $12.2 billion.

The death spiral “highlights why we need sustainable health care reform to manage the steadily rising costs of hospitals, drugs and doctors,” Anthem, which is based in Los Angeles, said in a statement.

To many in recession-racked California, however, the Obama administration’s populist rhetoric has sounded pitch perfect.

“As a trial lawyer, I’d make it Exhibit A,” said Joshua C. Needle, 57, of Santa Monica, whose premium is rising 33 percent. “I have no problem with profits, but they’re maximizing profits without any concern that they have a captive audience.”

Mr. Needle, like many of the 13 million Americans who buy insurance individually rather than through employers, cannot shop for a better deal because he has medical conditions like high cholesterol and glaucoma that would probably disqualify him with other carriers.

Once accepted by an insurer, consumers cannot be dropped for medical reasons. But in California, where Anthem controls more than half of the individual market, regulators have little power to prevent insurers from raising individual rates as high as the market will bear. That often forces consumers to move to less-generous policies with higher deductibles in order to hold down their costs.

Mr. Poizner, who is running for governor in the Republican primary, has hired actuaries to study whether Anthem is spending at least 70 percent of premium revenues on claims, as required by state regulations. WellPoint officials said they were confident that Anthem exceeded the threshold.

In the health care bills that have passed each chamber, but not been reconciled, Congressional Democrats would attack the cost of premiums in several ways. Everyone would be required to have health insurance, spreading risk among larger pools. Health insurance marketplaces, or exchanges, would force insurers to compete more transparently. Insurers would be prohibited from denying or canceling coverage because of medical conditions, and would be forced to spend at least 80 percent of premiums on claims.

Paradoxically, since WellPoint has lobbied vigorously against the legislation, the company argued last week that its “unfortunate but necessary” rate increases demonstrated the need for a major fix.

But the company found fault with the Democrats’ proposals, particularly what it sees as soft enforcement of a health insurance mandate that would allow millions of people to remain uninsured. Only if everyone is covered, the insurance industry argues, can it spread its risks sufficiently to stop rejecting those with pre-existing conditions.

“The reform being discussed in Washington will not do anything to address the underlying increases in costs,” said Brian A. Sassi, president of consumer business for WellPoint.

Medical costs have typically risen by 5 percent to 10 percent during each of the last five years. Mr. Poizner said he was starting to see significant increases for individual policies sold by some of Anthem’s competitors, and double-digit increases have been reported in other states.

Several insurance analysts said it was possible, but not necessarily likely, that such increases would become common, at least while the economic downturn persists. Insurance brokers in Los Angeles said they had never seen jumps of such magnitude in California health insurance quotes.

“It’s more astonishment than irritation,” a Pasadena broker, John W. Barrett, said of the reaction from his customers. “Irritation was last year and the year before. Now they’re astonished.”