California regulator scolds Anthem, praises UnitedHealth on rates

California’s insurance commissioner scolded Anthem Blue Cross for raising rates for small businesses while praising industry rival UnitedHealth Group Inc. for cutting worker premiums.

Escalating his campaign against rising health insurance rates, Insurance Commissioner Dave Jones said Anthem’s premium hike for companies with 50 or fewer workers, which he pegged at 11%, was “unreasonable” because the company overstated its projected medical costs and improperly added fees related to the federal healthcare law.


But state regulators have no authority to block Anthem’s rate increase from taking effect this month. “This is a huge loophole in California law and in the federal Affordable Care Act,” Jones said.

A November 2014 ballot measure backed by Jones and consumer groups would grant state officials the power to reject unreasonable rate increases for health coverage. The insurance commissioner has that authority for property and auto policies under Proposition 103. Thirty-seven other states already regulate health premiums, Jones said.

Quiz: Test your healthcare knowledge

Anthem Blue Cross disagreed with Jones’ criticism and many of his numbers. The company, a unit of industry giant WellPoint Inc., said the average increase for small businesses is nearly 8% and higher premiums are warranted to cover rising medical costs. But some small firms will pay as much as 17% more.

“The rate increases in the small group market are not unique to Anthem Blue Cross, but rather represent an economic reality faced throughout the entire industry as healthcare costs continue to escalate faster than our state’s economy as a whole,” company spokesman Darrel Ng said.

Jones said not every health insurer is thumbing its nose at the state. He said UnitedHealth, the nation’s largest health insurer, agreed to reduce rates for small businesses nearly 6%, on average, after the insurance department questioned its initial rate filing.

UnitedHealth was “responsive to their small-business customers,” Jones said. “Anthem Blue Cross told me regardless of my conclusion they were increasing their rates.”

In their review, state actuaries objected to Anthem’s estimate for patients’ future medical use and costs, Jones said. Regulators have been scrutinizing those numbers as the growth in U.S. healthcare spending hits historic lows as employers shift more costs onto workers and recession-weary consumers avoid unnecessary expenses.

This week, federal officials said U.S. medical spending grew 3.9% to $2.7 trillion in 2011, matching the slowest growth on record.

The insurance commissioner also said it was unlawful for Anthem to collect fees on customers this year that are not imposed by the federal government until 2014 under the Affordable Care Act. Jones estimated those fees could total more than $35 million this year on health policies that his agency regulates. Other health plans are regulated by the state’s Department of Managed Health Care.

Anthem said many of these annual policies extend into 2014, so it’s proper to pass along those fees, which it said amount to $9 per person annually.

The two sides also disagreed over how many employees and dependents would be affected by these changes. The state said 284,000 people could be affected as policies are renewed throughout the year, but Anthem said this rate filing covered only 52,396 people.

In its rate filings, Anthem said it expects net income of about $300 million in California for 2012. Companywide, WellPoint reported a $2.2-billion profit in the first nine months of last year. The Indianapolis company runs Blue Cross plans in California and 13 other states.

In a similar move in April, Jones labeled small-business rate hikes of as much as 21% from Aetna Inc. as unreasonable. Like Anthem, Aetna proceeded with the increases and said they were based on reasonable cost projections.

Insurance officials are still reviewing a separate filing from Anthem to raise rates by as much as 25% for about 630,000 individual policyholders, effective next month.

Families and small businesses are hoping they can find some rate relief in the state’s new insurance exchange, an online marketplace opening for enrollment in October. The exchange, called Covered California, aims to provide a wide range of policies with federal subsidies available to some consumers to help offset their premiums.