In a blistering attack on Anthem Blue Cross, California Insurance Commissioner Dave Jones said last week that the health insurer’s average 9.8% premium increase on 120,000 members in small group health insurance policies is unreasonable.
This latest increase is the fourth consecutive rate increase by Anthem on small employers that the Department of Insurance found excessive and unreasonable.
This fourth-quarter rate increase for Anthem’s small group policyholders imposes an average rate increase of 9.8%, while over the last 24 months Anthem has raised rates on members in these small group policies an average of 24.9%
“Anthem Blue Cross is once again imposing an unreasonable rate increase on its small employer members, while continuing to make excessive profits of over 20%,” Jones said.
“Small employers continue to struggle in this recovering economy and only dream of having the level of profits that Anthem and other health insurers have as they continue to increase their rates each year,” Jones added. “Unfortunately, California does not have the authority to reject excessive health insurance rates, unlike 35 other states which have this authority.”
The Department of Insurance’s finding that Anthem’s rate increase is unreasonable is based on Anthem’s return on equity or profits, its pre-tax pricing margin and what Jones said is its “unjustified high-pricing trend of 8.6%, which includes a prescription drug trend of 21.4%, and its failure to adjust the rate for the better health status of its remaining members.”
Jones added, “For the fourth consecutive time, over two years, Anthem has decided to implement an excessive and unjustified rate increase on small employers. This pattern and practice of excessive premium increases has a cumulative impact on the bottom line for California small businesses and yet, we are powerless to stop it.”
“Anthem’s refusal to lower this excessive rate increase means that small businesses will be charged $33 million in excessive premium and their only choices are to drop coverage or shop for other coverage, which often means a change in benefits or medical providers for their employees.”
The department’s conclusion that Anthem’s rate increase is excessive and unreasonable is based on data provided by the company and a comprehensive analysis by the department’s actuaries. The department’s health actuaries reviewed all aspects of the rate filings, including past claims history, utilization trends, medical and administrative costs, return on equity, and many other elements of the rate, and determined it was unreasonable.
However, Jones’ authority is limited to reviewing rate filings, with no authority to stop excessive health insurance rates from being imposed on policyholders. While state law requires the commissioner to determine if rates are excessive or unreasonable, neither state nor federal law makes the commissioner’s determination binding on the health insurers.
