Friday, February 15, 2013

Some Funny Math at Anthem Blue Cross

Anthem Blue Cross has agreed to lower premium rate hikes for about 630,000 individual policyholders in response to pressure from California insurance regulators, the Los Angeles Times reports (Terhune, Los Angeles Times, 2/15).


On Feb. 1, Anthem Blue Cross enacted premium rates increases that averaged 18% for certain individual policyholders(AP/Sacramento Bee, 2/14).

In a rate filing last fall, Anthem said certain medical costs have increased by nearly 11%, while the price that the insurer actually pays is rising by 13.5% after adjusting for customer deductibles.

According to Anthem, the profit margin on its individual insurance plans in California was less than 1% in 2012. The insurer said it expects to lose money in the individual market in 2013 even with the rate hike (California Healthline, 11/28/12).

The state Department of Insurance deemed the premium hike excessive, saying that the rate request included unsubstantiated estimates of expected medical costs.

While the agency can review rate filings, it does not have the authority to reject them.

Details of New Rate Increase

On Thursday, Insurance Commissioner Dave Jones (D) announced that Anthem has agreed to reduce the average premium increase to 14%. The decision will save consumers an estimated $54 million.

The Times reports that even with the lower rate hike, some individual policyholders still could see their premiums increase by as much as 25%.

Anthem plans to provide refunds or premium credits to policyholders who already paid the higher rates this month (Los Angeles Times, 2/15).


In a statement, Jones said, "Health insurance has become unaffordable for far too many Californians." He added, "I appreciate that Anthem Blue Cross has agreed to lower these rates."

On Thursday, Darrel Ng -- spokesperson for Anthem -- said that the agreement between Anthem and California regulators still reflects rising health care costs (AP/Sacramento Bee, 2/14).

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