California's Insurance Commissioner Dave Jones said yesterday that his department has found the latest rate increase by Anthem Blue Cross Life and Health Insurance Company are excessive and unreasonable.
His remarks followed Anthem's announcement that it is increasing rates on its small group health insurance policyholders, while posting a return on equity of 25.2% as noted in the company's 2012 financial statements. For some Anthem small business customers, this translates to a 12-month increase of 22.9%.
Jones said the average 12-month increase for the policyholders impacted by this rate filing is 10.5%. Anthem's April 1 small group rate increases ultimately impact more than a quarter of a million healthcare consumers.
"Tough economic times in California have been particularly challenging for small businesses," Jones said. "These ongoing and excessive rate increases are simply unsustainable, as many small businesses struggle simply to survive."
"Anthem Blue Cross is imposing yet another unreasonable and excessive rate increase on small employers when the company is posting a 2012 profit-as measured by return on equity-of more than 25%," he added.
The state's Insurance Department actuaries reviewed Anthem's rate filing and found a number of unreasonable components, including overestimated future claims and utilization, excessive return on equity and charging policyholders in 2013 for healthcare reform fees and taxes that are not even being collected by the federal government until 2014, Jones said. In fact, the federal government has yet to even determine the amount of some of those fees and taxes.
The April 1 rate increase will impact approximately 45,000 healthcare consumers within 7,000 small business employer groups whose policies are up for renewal between now and June. It will also be imposed on the rest of the small business policyholders as their polices renew throughout the rest of the year, ultimately impacting as many as a quarter of a million healthcare consumers, Jones said.
This is the second time this year Anthem has imposed a rate increase on its small business customers despite Jones' determination that the rate increase is unreasonable. Still, neither California law nor the Affordable Care Act prohibits health insurers from imposing rate increases. State law does, however, prevent excessive rate increases for other lines of insurance, such as auto, homeowners and medical malpractice insurance.
Jones has asked Anthem to reduce the average rate increase by 2.5% for small businesses, which is an average reduction of 7.3% from the filed rates.
If Anthem had agreed to lower the rates, policyholders would have saved $57 million over the rates that Anthem is now imposing, Jones said.