Scrutiny matters, part II…

More good news about why increased oversight–both legislatively and regulatorily–makes a difference.

Less than a week after Blue Shield of California decided to withdraw its rate increases for the remainder of 2011, Anthem Blue Cross announced their intent to delay and reduce its most recently proposed health insurance rate increase.

It’s welcome news, and well-timed with the one-year anniversary week of the Affordable Care Act, which provided for greater scrutiny of insurance rates and was implemented here in California. This once again shows that scrutiny matters, and why California need to go further with the passage of AB52 (Feuer) to provide regulators explicit authority to approve and deny rates.

Insurance Commissioner Dave Jones released the following statement, below:

“Today, I am pleased to announce good news for over 600,000 Californians who have individual or family plan health insurance from Anthem Blue Cross.

“As a result of the Department of Insurance review, Anthem Blue Cross is reducing its rate increase from 16.4 percent to 9.1 percent; delaying the effective date of the rate increase from April 1st to July 1st; and delaying increases in co-payments and deductibles proposed for April 1st to January 1, 2012. All told, this will save Anthem Blue Cross policyholders a total of at least $40 million. But this decision by Anthem Blue Cross to reduce its rate increase underscores the need to give the Insurance Commissioner the authority to reject excessive rate hikes, an authority that I do not have.

“During my first week as Insurance Commissioner, I asked the four largest health insurers with pending rate increases to delay implementation of those rate increases for 60-days beyond their original implementation date. I asked for this delay so that I would have adequate time to thoroughly review those rate filings. To its credit, Anthem Blue Cross quickly agreed to my request to delay their rate increase, originally scheduled for April 1st, to June 1st.

“We reviewed the rate filing information submitted by Anthem at the end of last year. We requested additional information about Anthem’s proposal. We have posted the rate filing and the supplemental information on the Department of Insurance website for the public to see.

“After reviewing the information that Anthem provided at our request, we determined that what was described as an average increase of 9.8% was more accurately described as an increase of 16.4%. There are two reasons the rate increase was really 16.4%, not 9.8%.

“First, the rate increase included co-payment and deductible increases in most Anthem Blue Cross individual plans. One of the more troubling aspects of the proposal was that some deductibles would have gone up in the middle of the calendar year. Someone could have spent enough out-of-pocket to have met their deductible in April, only to be told in June that a medical visit would not be covered because their deductible amount had increased in the middle of the year. Increasing the deductible mid year is akin to moving the goal posts further downfield. When factoring in these benefit reductions and deductible increases, the value of the rate increase was actually 13.4%.

“Second, the original rate filing proposed to increase premiums by 1.3% for each month the rate increase was delayed after April 1st. Delaying the rate increase to June 1st meant that the actual average rate increase, including the delay and the benefit reductions, was actually a total of 16.4%.

“In our review of the rate filing, we also reached different conclusions about the trend of medical prices, utilization and membership than Anthem had reached in its rate filing. Based on this analysis and the impact of an over 16% increase in rates on Anthem Blue Cross policyholders, I asked Anthem Blue Cross to reconsider its rate increase.

“Anthem Blue Cross is announcing today that it is reducing its rate increase from an average of 16.4% to an average increase of 9.1% beginning July 1st, rather than April 1st. Changes to the co-payment and deductible amounts will be delayed until January 1st. This will result in over 600,000 policyholders saving money. For some it may be the difference between whether they keep their current coverage, switch to a plan that offers less benefits or drop coverage altogether. The total savings to policyholders is estimated to be at least $40 million.

“I am pleased that Anthem Blue Cross has agreed to lower their proposed rates because this decision will have a significant positive financial impact on the affected policyholders.

“Many of the Anthem policyholders who contacted my office about Anthem’s latest rate filing were unaware that as Insurance Commissioner I lack the authority to reject excessive rate hikes. That continues to be the case. Insurance companies get to set their rates and I can only request that they make a change, which is not the system that consumers want or deserve. Anthem Blue Cross has decided to reduce its rate proposal, but this reduction does not change the fact that prior rate increases remain in effect and they have hit consumers hard.

“Health insurers still hold all the cards and consumers remain at their mercy. As a member of the State Legislature I authored three bills over five years to give the Insurance Commissioner the authority to reject excessive rate hikes. I have that authority for auto, property and casualty insurance, under a law called Proposition 103. Since Proposition 103 was passed by the voters in 1988, we have saved consumers and businesses billions of dollars in excessive premiums because the Insurance Commissioner has rejected excessive increases for those insurance lines. Health insurance is every bit as important as car insurance.

“I am asking again that the Legislature give me the authority to reject excessive health insurance rate increases. The bill I introduced as a member of the State Legislature has been re-introduced as Assembly Bill 52 by Assembly Member Mike Feuer. AB 52 would give me the power to reject excessive rate increases. Californians should write, call and email their legislators and urge them to support Assembly Bill 52.”

Health Access California promotes quality, affordable health care for all Californians.

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