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Anthem, Aetna submit new rate requests in California

The state's insurance department will check whether the health plans' latest proposed rate hikes would keep them compliant with the state's medical spending minimum.

By Emily Berry — Posted July 19, 2010

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Anthem Blue Cross and Aetna submitted new premium increase requests to California state regulators after admitting that previous requests contained mathematical errors that pushed the prior requests too high.

Anthem's new filing, submitted June 30, would raise rates for individual subscribers by an average of 14% and a maximum of 20% for about 700,000 people. Its recently withdrawn rate increases would have raised premiums by an average of 25%, with a maximum 39% rate increase.

The originally proposed steep increases put Anthem, a subsidiary of Indianapolis-based WellPoint, under intense criticism from consumer groups and politicians in California as well as in Washington, D.C. Anthem's request -- and the Obama administration's public, angry reaction to it -- is widely credited with having revived the push for health system reform legislation.

California Insurance Commissioner Steve Poizner does not have the authority to approve or deny rate increases. But he can verify that insurers are spending at least the required 70% of premiums on patient care rather than administrative costs or profits. Poizner hired an independent actuarial firm to do that, and the resulting report showed that Anthem's original rate increase request was based on faulty calculations. Anthem withdrew its request in April.

After Poizner expanded the actuarial review to the other three of the state's four largest private health insurers, Aetna withdrew an application the company said contained math errors. Aetna submitted a revised rate request June 29. However, the revised request maintains the same maximum increase of 18.7% for about 65,000 customers as its earlier filing.

Anthem and Aetna have asked that their newly proposed rates take effect Sept. 1 if they meet the 70% standard.

The same independent actuary that examined the earlier rate requests will look at the new filings, said California Insurance Dept. spokesman Darrel Ng.

An April application from Blue Shield of California remained pending as of this article's deadline. Blue Shield wants to raise rates for individually purchased health insurance policies by 18%, which would affect 240,000 of its customers.

Rate filings now online

In the meantime, Poizner announced that he would post the applications from all three companies, as well as any future rate increase requests from another large California insurer, Health Net, to allow anyone to check the companies' math. All of the materials are posted online.

Ng said making the filings public is meant to encourage insurers to check their calculations carefully before submitting rate requests.

Anthem spokeswoman Kristin Binns said the company supports the effort to improve transparency, and posted details of its rate requests on its own website as well.

Meanwhile, legislation that would give the insurance commissioner authority to review, approve or deny rate increase requests passed the state's Assembly in June, and was pending in the state Senate at this article's deadline. Anthem opposes rate regulation as an "artificial means of price control," Binns said.

Ng said Poizner does not support the bill because it doesn't do anything to hold down medical costs, which Poizner believes drive up premiums.

The Patient Protection and Affordable Care Act enacted in March gave the federal government authority to review rate increase requests, and that authority now rests with the Office of Consumer Information and Insurance Oversight at the U.S. Dept. of Health and Human Services.

It's unclear when or how that office will exercise its authority directly to reject or approve rates, but the department has announced that it will award $51 million in grants this year to states to help enhance their own rate review processes. California Gov. Arnold Schwarzenegger's office announced July 7 that California would apply for one of those grants.

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External links

Individual health insurance rate filings, California Dept. of Insurance (link)

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