California’s insurance commissioner and the Obama Administration are seeking answers as to why Anthem Blue Cross wants to raise its individual health insurance premiums by as much as 39% for some state residents.

In a pair of letters to Anthem and its parent company, WellPoint, federal officials questioned the need for such a hike amid stressed economic conditions and the possibility of nationwide health care reform.

In a letter to Leslie Margolin, Anthem’s president, U.S. Department of Health and Human Services Secretary Kathleen Sebelius noted that WellPoint earned $2.7 billion in the last quarter of 2009 and her belief that “Anthem Blue Cross has a responsibility to provide a detailed justification for these rate increases to the public.”

She urged the company to make information public on the percentage of its individual market premiums used for medical care versus the percentage used for administrative costs as policyholders “deserve to know if their premium increases would be invested in better medical care or insurance company overhead costs like salaries, profits, and advertising.”

Federal government to monitor situation

“I am aware that the State of California is investigating this matter, and urge Anthem Blue Cross to cooperate fully. In the meantime, I will be closely monitoring the situation,” Sebelius said. “At a time when health care costs are a critical threat to families as well as the nation’s economy, I hope you appreciate the urgent nature of this request. I look forward to your prompt reply.”

Steve Poizner

California Insurance Commissioner Steve Poizner, who is running for governor this year, called Anthem’s request “dramatic” in a statement of his own, urging WellPoint’s management to postpone the rate increase until May 1, to allow his office to conduct an independent actuarial review of their proposal.

In a letter to WellPoint President and Chief Executive Officer Angela F. Braly and Larry C. Glasscock, the chairman of the health insurer’s board of directors, Poizner said given the current economy, the rate increase request “could have a devastating financial impact on hundreds of thousands of its policyholders in California.

“The Department has received numerous complaints from irate Californians describing how Anthem’s proposed rate increases would cripple them financially,” he wrote.

WellPoint operates as Anthem Blue Cross in Virginia, outside of Northern Virginia, and as Empire Blue Cross in 10 New York City metropolitan and surrounding counties, as well as in several upstate counties in New York. The company, which also operates Blue Cross Blue Shield plans in 12 other states, is the largest private insurer based on membership.