California insurance chief expands inquiry into healthcare rate hikes

California’s new insurance commissioner has expanded his inquiry into rate hikes by major insurers, calling on them to delay pending increases for 60 days while he examines paperwork submitted to his office.

Commissioner Dave Jones had already urged Blue Shield of California to refrain from raising rates for a third time in five months. The increases would drive up consumers’ bills as much as 59% cumulatively.

On Tuesday, Jones notified Aetna Inc., Anthem Blue Cross and PacifiCare that he also was focusing on them. The insurers said they could not comment because they had not seen letters sent by the commissioner.

Under review are individual policies overseen by the state Department of Insurance. Jones has limited power to review such filings; he can block them only if insurance companies spend less than 70% of their premiums on healthcare expenses.


“The state’s largest health insurers have submitted multiple premium increases for early 2011, and I am very concerned about the impact these increases will have on policyholders, especially since I have not had sufficient time to review these filings,” Jones said in a statement. He took office last week.

Spiraling insurance rates are coming under review for a second year in a row, after a national uproar over Anthem Blue Cross’ attempt last year to raise individual rates as much as 39%.

Anthem was forced to withdraw its rates after the state found mistakes in its filing. It settled for smaller increases, but not before a six-month delay led to losses of as much as $150 million for the Woodland Hills company.

This year, Anthem said, rate hikes to take effect April 1 will average 9.8% for 638,000 individual policyholders. The insurer did not disclose its maximum increases. Jones asked Anthem to postpone the April 1 hike and a separate one that was scheduled to start Jan. 1.

Jones also wants Aetna to put on hold an April 1 increase averaging 20.7% for a portion of its individual business. It raised individual rates an average of 19% in October after delaying the increase for three months. Its maximum increase was 30%.

Also targeted by Jones are increases by PacifiCare. The firm planned to raise premiums 2% to 9% as of Jan. 1, a spokeswoman said.

State insurance officials said Health Net Inc. would face no further scrutiny for its own Jan. 1 increase. A review showed that the policies met the 70% requirement for spending on healthcare, an official said.

Health Net’s increases will average 4% for 37,000 policyholders, a spokesman said. About 150 members will see the largest increases of 29.6%. In October, the insurer raised rates an average of 16% and as high as 25% after a three-month delay.


Also after a three-month delay, Blue Shield raised premiums in October an average of 19% and as much as 29% — the first annual increase in more than 15 months, the nonprofit company said.

Blue Shield had planned to raise rates Jan. 1 and again March 1. The company said higher rates were necessary to keep up healthcare costs, the increased use of medical services by its members and new mandates in state and federal healthcare laws, among other factors.

Even with higher rates, the company said, it lost as much as $20 million on individual policies in 2010 and would lose up to $30 million this year.

“We regret the premium increases that our individual and family plan members have experienced during the past several months. Unfortunately, the rates reflect what it costs to pay for the medical expenses of those members,” Chief Operating Officer Paul Markovich said in a statement last week.


Markovich added: “We are working closely with our members, business customers and care providers to improve healthcare quality while holding the line on costs. It will take a gargantuan effort on the part of government and the private sector to reverse the trends that are making healthcare unaffordable for millions of Americans. We intend to play an active role in that effort.”

A Blue Shield spokesman said Tuesday that the company was still in discussions with Jones’ office about the request for a 60-day delay. Jones said he planned to push ahead to enforce a new California law that requires regulators to review the actuarial basis for rate increases.

“I have an obligation to California policyholders and to the law to closely scrutinize any rate filings, and that is what I intend to do,” Jones said. “The request I have made for additional time from these insurers is one that I believe to be both fair and reasonable. I hope they will comply.”