Aetna Abandons Health Insurance Rate Increase in California

Published: Mon 28 Jun 2010

Larry Roth

Another health insurance company has abandoned a rate-increase proposal after an independent review found errors in complex calculations the insurer relied on to justify increasing 65,000 customers' rates by 19 percent, on average.

Ordered by California regulators, the review revealed Aetna's proposal erroneously multiplied when switching the monthly premium into a yearly one, and the premium increase was not compounded properly.

The computational errors led to artificially inflated rate increases, but it is not clear how inaccurate the rates were because the health insurance company withdrew the premium hike before the review concluded, Darrel Ng, spokesman for the Department of Insurance, said.

The independent review was a portion of a larger regulatory action by Insurance Commissioner Steve Poizner, who called for independent reviews earlier this month of all rate increases for individual health insurance plans at California's four largest insurers.

The top four health insurers own 90 percent of the market for the roughly 1.1 million individual health insurance plans regulated by the California Department of Insurance. Another 1.4 million similar policies are regulated by the Department of Managed Health Care.

More Reviews Planned

Aetna claimed in a statement that it performed a third round of rate hike reviews internally and "found a miscalculation not previously detected. This was simple human error."

Blue Shield proposed an increase that is also under review currently, and future rate hikes from Health Net and Anthem Blue Cross will also be reviewed.

In the state of California, health insurers must spend 70 cents of every health insurance premium dollar on health benefits.

Anthem Blue Cross withdrew a proposal in April to raise rates by 39 percent for some policyholders after experiencing widespread public anger and regulatory scrutiny.

President Obama repeatedly pointed to Anthem's proposed rate increase as an example of a dysfunctional medical care system while trying to recruit votes for his health care reform legislation.

One day after its parent corporation, Wellpoint, announced a 51-percent rise in first-quarter profits, Anthem withdrew the proposed rate increase.

Poizner has promised additional transparency in the health insurance rate hike process because two of the four largest health insurance companies have provided filings with errors in them.

"I have decided to take the exceptional step to post future individual health insurance filings on the Department of Insurance's website," explained Poizner. The decision will "allow any member of the public to scrutinize these rate filings and will, in the end, minimize rate increases by keeping markets as competitive as possible."