Health plans encounter resistance to higher premiums

New Mexico and Rhode Island are among the states where rate increases have been met with requests for details, conditional approvals or denials from regulators.

By Emily Berry — Posted Aug. 2, 2010

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On the heels of closely watched negotiations between California Insurance Commissioner Steve Poizner and Anthem Blue Cross over rates and medical spending, insurers have found state regulators less willing to approve rate hikes based on health insurance companies' need to collect higher premiums.

In many states, insurance commissioners don't have the authority to deny rate hikes. In others, commissioners have done little to stand in the way of insurers who say they need to raise premiums. But some regulators are taking action.

In California, revised rate increase applications remained pending for Anthem and Aetna at this article's deadline. Both companies withdrew earlier applications that an independent actuary found to be based on flawed math.

In addition, states including Colorado, Connecticut, Maine, Massachusetts and Pennsylvania are in the midst of official inquiries and legal battles to investigate the rationale for higher premiums. In some cases, insurers face actions that would bar or limit their requests for higher rates.

"We have seen, unfortunately, the rate review process has become politicized over the past year," said Robert Zirkelbach, spokesman for trade group America's Health Insurance Plans. "Health plans calculate premiums using objective standards on what is needed to meet the expected cost of health care."

Scrutiny of rate increases

Though insurance commissioners say they are acting based on their states' unique circumstances, the events in California have put other health plans' proposed rate hikes under scrutiny by the press and the public, giving regulators in some cases a political mandate to ask insurers to justify the increases in more detail.

For example, BlueCross BlueShield of New Mexico, owned by Chicago-based Health Care Service Corp., is at odds with the state's interim superintendent of insurance, Johnny Montoya. He reversed his predecessor's approval of a 21.3% rate hike on individual customers -- an increase less than the Blues' request for a 24.6% average hike.

The New Mexico Blues plan was allowed to charge the new rates for the time being. But Montoya withdrew the insurance department's approval until a hearing could take place. The company took the matter to the state's Supreme Court, and a first hearing was scheduled for July 28 at this article's deadline.

The insurer called the Montoya's decision "arbitrary," saying in a statement that it "stepped in to ensure the system operates legally and fairly for everyone and that the [Public Regulation Commission, which regulates the insurance industry] and acting superintendent comply with the rules governing the rate process for the benefit of all impacted stakeholders."

In the meantime, a more subdued battle is ongoing in Rhode Island. State Health Insurance Commissioner Christopher Koller released a set of "rate factors" July 7 that determine rates his office would approve in the group insurance market. The factors were accompanied by a set of requirements, including a mandate that insurers tie pay to quality of care.

Koller said the unique state laws that govern his office were behind his decisions. "We have about as comprehensive a set of rate review process as exists in the country. ... I think we pay attention to what goes on elsewhere, but we're guided really by our statute."

The new rate factors meant the companies were allowed to raise rates less than they had requested -- for BlueCross BlueShield of Rhode Island, 9.8% for small and large group coverage rather than the 12.4% and 13.2% increase the insurer requested.

In response, the plan released a statement that said in part that the new rates would not cover the cost of members' medical claims, but the company welcomed the commissioner's requirements tied to quality.

Steve DeToy, a spokesman for the Rhode Island Medical Society, said the regulations have advantages for insurers and physicians.

"The upside to the insurers is that they've gained a little leverage on the hospitals," he said. "Hospitals here, like every other market in the country, continue to absorb more of the premium dollars, which makes less for other providers."

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