Insurance premium hikes pit health plans against states

Virginia's insurance department signed off on Anthem's rate hike, but insurers around the country are facing stiff resistance to raising premiums.

By — Posted April 19, 2010

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State regulators are clashing with insurance companies over proposed premium increases for individual and small business health insurance, in some cases limiting or denying requests for rate hikes.

One dispute already has made it to court. In a lawsuit filed April 5, Blue Cross Blue Shield of Massachusetts and five other insurers sued the state's insurance division after it rejected nearly every rate increase for small group coverage requested for this spring and summer.

Massachusetts Gov. Deval Patrick in February issued an emergency order requiring insurers to submit additional documentation to justify rate increases in the small group market. After reviewing requests and supporting evidence, the division rejected 235 of the 274 new premium rates as excessive.

In the lawsuit, the Massachusetts Blues plan and other insurers asked for an injunction that would keep the state from enforcing its decision. The Suffolk Circuit Court on April 12 rejected that request. The plans had contended that the insurance commissioner exceeded his authority by "arbitrarily" setting rates in the individual and small group market.

Announcing their decision April 1, the governor and insurance commissioner's office said the denials were based on insurers' failure to demonstrate, among other things, that any disparity in reimbursement rates for physicians and hospitals was based solely on quality, and that the company had done its best to renegotiate reimbursement contracts as a way to lower premiums.

Among the skirmishes over rates in other states:

  • Legislation that would give insurance commissioners "prior approval" authority over rate increases of a minimum size is pending in multiple states, including New York and California. Without that authority, commissioners have very limited power to delay, lower or reject higher rates. Only about half of states require approval by a state insurance commissioner or similar authority before a plan can raise premiums.
  • Increases for individual subscribers are pending in several states, including California and Iowa, awaiting approval from state insurance regulators.
  • In Maine, a judge was expected to rule in April if the state's insurance commissioner overstepped her authority by unilaterally lowering WellPoint-owned Anthem Blue Cross Blue Shield of Maine's 2009 requested rate increase to a point Anthem claimed would allow it only to break even.

Regulators' resistance to premium increases hasn't been across the board, however.

In late March, Anthem Blue Cross and Blue Shield, a WellPoint subsidiary, won approval in Virginia for a 12% rate hike for more than 2,700 individual subscribers, set to take effect June 1 and July 1.

Higher rates approved in January for Anthem Blue Cross and Blue Shield of Wisconsin, also a WellPoint subsidiary, went into effect April 1. The more than 13,000 people who buy individual coverage are paying on average 17.2% more for their policies.

Wisconsin's two U.S. senators, both Democrats, had asked WellPoint in a March 3 letter to reconsider the increase, "taking into account how these higher rates would impact the many Wisconsinites who are struggling financially."

That letter was unsuccessful.

"We are engaging with a broad range of key stakeholders across Wisconsin to discuss the state's individual insurance market and share ideas on how we can collectively partner on meaningful change," Anthem spokesman Scott Larrivee said. "These efforts, however, cannot completely offset all the increases linked to the cost of care."

That has been the main argument for WellPoint and other insurers under pressure from state and federal authorities since the individual and small group markets became a key point in the debate over health system reform.

Anthem's proposal earlier in 2010 to raise rates on some California subscribers by as much as 39% was cited repeatedly by Obama administration officials as evidence that insurers were benefiting from a system that had left consumers with unmanageable costs. The rate increase in California is scheduled to go into effect May 1.

Outrage over the California rate increases and similar ones in other states helped put rate regulation in the final version of the Patient Protection and Affordable Care Act that President Obama signed March 23.

Under the new law, insurers must notify the U.S. Dept. of Health and Human Services of rate increases, and the department has the authority to intervene if the increase is unreasonable. The requirement is expected to go into effect Sept. 23, six months after the bill's passage.

For now, insurers aren't sure what the federal rate review will look like. Although they are concerned that the process will be politicized, no one knows how great a burden the new requirements will present, said Robert Zirkelbach, spokesman for trade group America's Health Insurance Plans.

"Capping premiums while letting medical costs soar will cause significant disruption and put at risk the coverage policyholders rely on," Zirkelbach said. "You can't divorce premium regulation from medical costs."

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State rate actions

Insurers in several states and the District of Columbia have faced intense questions over rate increases, and in some cases increases have been limited or denied outright. While plans cite rising costs as the basis for rate increases, some state officials say consumers in a struggling economy should not be subjected to repeated double-digit rate hikes.

District of Columbia: CareFirst BlueCross BlueShield

In a March 12 ruling, Insurance Commissioner Gennet Purcell limited rate increases on individual policies to 12%, rather than the requested increases of as much as 35%. Earlier in March, Purcell's office rescinded a rate hike for CareFirst individual coverage that it earlier had approved.

Iowa: Wellmark Blue Cross and Blue Shield

At the request of the state's insurance commissioner, who asked for more time to review the insurers' finances and rate increase application, the Iowa Blues plan agreed to delay from April 1 to May 1 a planned 18% premium hike for its 80,000 individual customers.

Maine: Anthem Blue Cross Blue Shield of Maine (WellPoint)

A judge was expected to rule in April if the state's insurance superintendent had exceeded her authority in 2009 when she limited Anthem's individual policy rate increases. Anthem claims it has a right to a reasonable profit margin of 3%. Anthem's 2010 rate increase request for the same policies also is pending.

Massachusetts: Blue Cross Blue Shield Massachusetts, five other insurers

When the state rejected most pending premium increases for the small-group market, the insurers filed a lawsuit April 5, claiming that the state was illegally implementing rate caps.

Virginia: Anthem Blue Cross Blue Shield of Virginia (WellPoint)

A 12% increase on individual policies approved in March will go into effect this summer.

Wisconsin: Anthem Blue Cross Blue Shield of Wisconsin (WellPoint)

Rates for individual coverage through Anthem rose an average of 17.2%, effective April 1. The increase was approved in January. U.S. Sens. Russ Feingold and Herb Kohl, both Wisconsin Democrats, wrote to the company March 3 asking it to reconsider.

Source: State regulators; insurers

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