Aetna rate hike is deemed ‘excessive’ by California regulator
SACRAMENTO — Aetna, the state’s third-largest health insurance company, is raising rates for thousands of small-business customers to a level that state insurance regulators call “excessive.”
California Insurance Commissioner Dave Jones on Thursday criticized Aetna Life Insurance Co. of Hartford, Conn., for raising health insurance group rates by an average of 8% a year for about 77,000 employees of small companies. The rate increases, which took effect April 1, were as high as 21% in some cases, Jones said.
Aetna countered that its rates “are based on actuarially sound data and reasonable projection of future cost, which will impact approximately 16,000 customers.”
Jones’ questioning of the Aetna rates is the first time a commissioner has publicly declared rates unreasonable or excessive. Jones used the opportunity to also restate his support for a proposed statewide ballot initiative that would give him the same power to approve or reject changes in health insurance rates that he has for automobile, homeowners and other types of property and casualty insurance.
“I am disappointed that Aetna has decided to reject my request to refrain from its latest health insurance rate increases on small employers, which are unreasonable and not justified by the company’s claims experiences,” Jones said.
“Like the recent unsustainable rate increases imposed by other health insurers on Californians,” he said, “Aetna’s rate increase proves again that we need to close the loophole in California law which denies the insurance commissioner the authority to reject excessive health insurance rate hikes.”
Jones’ finding of “unreasonable” was the commissioner’s first since a new state law took effect Jan. 1. The measure requires health insurers to publicly release justification for their rate increases but does not give the commissioner the authority to reject them.
Jones said his actuaries questioned the Aetna increase after determining that the company’s California health insurance subsidiary made a 27.7% profit in 2011 and paid $1.7 billion in dividends to its parent company.
Aetna posted $1.74 billion in premiums for policies in 2010 and controlled about 10% of the California market for accident and health insurance, according to the Department of Insurance website.
The company said it pays out an average of 87 cents in claims for each $1 received in premiums, a higher so-called medical-loss ratio than that of any of its California competitors.
“Aetna takes our commitment to our small-business customers seriously, and we are making every effort to maintain an affordable array of products that provide access to quality healthcare services,” Aetna said in a statement.
Jones is the highest-profile backer of a proposed initiative that would force health insurers, health maintenance organizations and preferred provider networks to seek approval from the insurance commissioner before raising or lowering rates.
Backers of the proposed initiative, dubbed Justify Rates, said they have gathered about 300,000 of the 800,000 signatures they want to get from registered voters to qualify for the November ballot.
The initiative, author Jamie Court said, “is a poster child for what we need to give the commissioner: the power to say no.”
The ballot measure is opposed by trade groups for health insurers, doctors and hospitals. They contend that its passage would create a costly new healthcare bureaucracy and give too much power to the state’s elected insurance commissioner.