Two health carriers are saying they have no choice but to raise rates in California, in spite of Golden State regulators’ objections.
California Insurance Commissioner Dave Jones and Brent Barnhart, the director of the California Department of Managed Health Care, have been trying to get Blue Shield of California to reduce an 11.8 percent managed care plan increase and an 11.7 percent health insurance plan increase.
Barnhart has been trying to get Aetna Inc. (NYSE:AET) to reduce an 11.4 percent increase.
The Aetna increase is set to take effect April 1 and affect 20,000 small group managed care plan enrollees.
The California Blue Shield increases took effect March 1 and affected 27,000 individual managed care plan enrollees and 268,000 holders of individual policies.
Jones has noted that the California Blue Shield increases could be as high as 19.9 percent for some policyholders who move from one age category into another.
Jones and Barnhart have called the increases unreasonable.
But California law and the federal Patient Protection and Affordable Care Act of 2010 (PPACA) rate review rules simply give states the authority to review proposed health rate increases and publish information about the increases, not to reject increases or to require carriers to reduce the increases.
“I am disappointed that after lengthy negotiations, Blue Shield and Aetna were unwilling to bring their proposed health plan increases down to a reasonable level,” Barnhart said in a statement.
Jones, who has been fighting for the statutory authority to reject and reduce rate increases, said Californians will continue to see ever rising rates until the rate review law is changed.
California Blue Shield has projected administrative costs of 20.2 percent, and those are the highest among major carriers in the individual market, Jones said.
Barnhart noted that he, too, lacks the authority to deny rate increases but suggested that rate reviews and negotiations often lead to a reduction in proposed increases.
California Blue Shield said in a statement that it believes its individual and family rates are reasonable, and that its rate increases have been lower than the recent rate increases approved for most of its major competitors.
“Our premiums in the individual market are competitive with, and in some cases lower than, those of our competitors,” the company said. “These rates reflect the increases needed to keep pace with the medical costs for our members in 2013. Unfortunately, the cost of hospital and physician services, prescription drugs, and diagnostic tests continues to rise.”
California Blue Shield spends at least 80 percent of individual and small group premiums on medical care, as required by PPACA, and the company has lost tens of millions of dollars in the individual market in recent years, the company said.
“We expect similar losses in 2013,” the company said.
The company tries to pay rebates when its overall profits exceed 2 percent of revenue, the company said.
An Aetna representative noted that Aetna’s 11.4 percent actual increase is lower than the 13.1 percent increase it had originally proposed.
The company lowered the increase to reflect removing some PPACA-related charges from the increase, the Aetna rep said.
“Our profit margin of 1.9 percent is at the lowest end of the range compared to our competitors’ filings,” the rep said.
Aetna expects to spend meet the PPACA minimum loss ratio (MLR) requirement in California and spend about 81 percent of small group revenue in the state on health care and quality improvement efforts, the rep said.
“We take our commitment to our small business customers seriously and are making every effort to maintain an affordable array of products that provide access to quality health services,” the rep said.