Anthem Partly Walks Back Rate Hike

A ballot proposition that would give the California Insurance Commissioner more authority to regulate health insurance rates has an uncertain future when it goes to voters next month, but Commissioner Dave Jones is apparently still able to use his office to soften payer moves to raise rates.

Just hours after Jones’ office denounced a move by Anthem Blue Cross of California to increase premiums for 120,000 enrollees in small group plans an average of 9.8%, the insurer backed off the plan, instead saying it would raise rates only an average of 7.8%. Jones had asked for an increase of 2.1% instead.

“Anthem's reduction of the rate increase, if true, demonstrates that the Department of Insurance was correct in finding Anthem's rate excessive and unreasonable. Anthem's newly revised increase of 7.8%  is still excessive and unreasonable,” Jones’ office said in a statement. It noted that with the present increase, Anthem had raised premiums on its small employer groups by nearly 25% over the past two years.

"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 said.

Anthem officials said that the small group book of business affected by the premium increase has lost $8.5 million so far this year, driven primarily by increases in pharmaceutical costs. 

“Even costs per unit for common drugs like insulin are increasing more than 25% over the last year,” the company said, indicating that the 2.1% rate increase suggested by Jones would not cover its losses.

Jones has no power to reject any premium increases sought by insurers, but he is able to use actuarial data to determine whether they are justified, and publicly air his grievances. Anthem Blue Cross and Blue Shield of California have reduced some rate increases in recent years when Jones declared them unreasonable.

Next month, voters will decide the fate of Proposition 45, which would give Jones’ office the power to reject any premium increases deemed unreasonable, a power already held over automobile insurers. The initiative is fiercely opposed by the insurance industry, which has spent about $38 million in television and radio advertising to date to defeat the measure. Prop. 45 still has a slim margin of support among likely voters in opinion polls, but it has been narrowing since the late summer.