Anthem rate increase ‘excessive,’ state insurance regulator says

Small-business “policyholders could have saved over $33 million had [Anthem Blue Cross] lowered rates as we requested,” Insurance Commission Dave Jones said.
Small-business “policyholders could have saved over $33 million had [Anthem Blue Cross] lowered rates as we requested,” Insurance Commission Dave Jones said.
(Bryan Chan / Los Angeles Times)

In the final days of a battle over Proposition 45, California’s insurance commissioner criticized Anthem Blue Cross for an “excessive” rate increase affecting 120,000 people with small-business health coverage.

Dave Jones said Anthem had failed to justify its 10% average rate increase and used an “unwarranted accounting maneuver” to mask its high profits.

But Jones has no power now to stop Anthem’s increase, a fact he’s been campaigning hard to change with Proposition 45.


The Nov. 4 ballot measure would grant the commissioner authority to deny unreasonable rate increases affecting as many as 6 million Californians with individual and small-business health policies.

The latest Anthem rate increase, filed with regulators in July, took effect Oct. 1 for about 15,000 small employers with nearly 120,000 workers and dependents. Some of these employers are paying as much as 14% more, state records show.

Jones said his department’s actuaries determined that a 2.1% increase was justified, but the company refused to budge.

“These policyholders could have saved over $33 million had they lowered rates as we requested,” Jones said.

Anthem is the state’s largest for-profit health insurer and a unit of industry giant WellPoint Inc.

The company said the average rate increase will be closer to 8% after examining additional information since the filing was submitted to regulators.


Anthem said it “could not comply” with the commissioner’s request because it would have led to “widening losses in this part of the small-group market” that already have hit $8.5 million.

Those affected make up a small portion of the company’s total membership in the state. Anthem led California with a 30% share of the small-business market in 2012, according to Citigroup research.

Anthem, rival Kaiser Permanente and other big health plans have poured $55.4 million into a campaign to defeat Proposition 45. Backers have raised about $2.5 million.

Support for Proposition 45 is waning less than two weeks before the election, according to a new poll released Wednesday by the Public Policy Institute of California.

Among likely voters, 39% said they back the measure. That’s a drop of 9 percentage points since a similar poll in September showed 48% in favor.

Nearly half of those surveyed, 46%, said they would vote against the initiative, while 15% were undecided. The poll of 976 likely voters had a margin of error of 4.6 percentage points.


Both sides of the Proposition 45 debate pounced on Jones’ rebuke of Anthem.

Opponents said Jones’ handling of this case proves that the commissioner can’t be trusted with additional authority.

“I don’t think you could come up with a better example of rate review being a political football instead of a fair and objective process,” said Micah Weinberg, a senior policy advisor at the Bay Area Council, a San Francisco group backed by employers and insurers.

Supporters of the ballot measure said it shows the financial toll on thousands of consumers and businesses when health insurers are left unchecked.

“This is Exhibit A for why we need health-insurance rate regulation. Anthem is spitting in the eyes of voters right before the election,” said Jamie Court, president of Consumer Watchdog.

Consumer Watchdog, a Santa Monica advocacy group, wrote Proposition 45 and collected signatures to get it on the ballot. It also was behind Proposition 103 in 1988, which imposed similar rate approval for auto and property insurance.

Thirty-five other states have some form of rate regulation on health insurance.

On Anthem’s latest increase, Jones said the company put $75.5 million into a “premium deficiency reserve” to understate its profits, which are part of the state review. He also said Anthem inflated its projection for prescription-drug costs to justify higher rates.


Anthem stood by its calculations and said setting money aside for future losses is appropriate.

Covered California, the state’s Obamacare exchange, has warned that Proposition 45 could undermine its ability to negotiate rates with insurers and have health plans available in time for open enrollment.

Jones has said that rate reviews can be expedited to meet the exchange’s deadlines and that his oversight won’t disrupt the rollout of the Affordable Care Act in California.

Twitter: @chadterhune

Times staff writer Marc Lifsher in Sacramento contributed to this report.