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California To Conduct More Health Rate Actuarial Reviews

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The California Department of Insurance will subject individual health insurance rate changes filed by the four biggest health carriers to an additional level of actuarial scrutiny, officials say.

The California department plans to give extra attention to individual health rate proposals coming from WellPoint Inc., Indianapolis (NYSE:WLP); Health Net Inc., Woodland Hills, Calif. (NYSE:HNT); Blue Shield of California, San Francisco; and Aetna Inc., Hartford (NYSE:AET).

Those carriers cover about 90% of the California residents who have individual health coverage, officials say.

An outside actuarial firm, Axene Health Partners L.L.C., Winchester, Calif., reviewed individual health rate filings submitted by a unit of WellPoint and found indications that some increases were significantly higher than state law allows, according to California Insurance Commissioner Steve Poizner.

California does not require prior approval of individual health rate changes, but it does require that insurers spend 70% of individual health premiums collected on medical benefits, officials say.

“By subjecting insurer rate filings to this additional level of scrutiny, California consumers will know that all major insurers are adhering to the state’s requirement that 70% of premiums are spent on medical benefits,” Poizner says in a statement.

Axene now is reviewing filings by Aetna and California Blue Shiel, officials say.

Aetna has been working with the California department on individual health rates and filed a notice in March stating that it would increase California individual rates by an average of 18.7%, according to Aetna spokesman Cynthia Michener.

The increase would raise the average individual insured’s monthly premium payments by about $50, Michener says.

“We voluntarily instituted a rate increase cap at 30% for our individual members till the end of the year, and that includes age-related increases,” Michener says.

Aetna has conducted thorough internal actuarial reviews of its pending rate increases and believes it can show that they are justified, Michener says.

Health Net says in a statement that it is important for the public to have confidence that the rates they are charged have been calculated in full compliance with the law.

The new Affordable Care Act – the federal legislative package that includes the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act – will have an affect on health insurance rates, Health Net says.

The ACA minimum medical cost ratio provisions will require individual health insurers to spend at least 80% of premiums on health care and health improvement activities.

“These provisions should be given time to work,” Health Net says. “In the meantime it is important we also work with our provider partners on the major cause of premium increases — the increasing cost of care.”

Health Net is in compliance with existing regulations and believes it will be in compliance with the ACA requirements, Health Net says.

California Blue Shield also is expressing optimism about the new actuarial review system. “We believe we’ve done a very thorough and careful rate filing, but are happy to comply with the DOI and provide them with the necessary information,” says Erica Perng, a company representative.

Representatives from WellPoint were not immediately available to comment on the new California actuarial review efforts.