Conn. insurance rate hikes prompt outcry amid politically charged backdrop

Insurance rate increases in Connecticut by a WellPoint subsidiary have attracted attention from outside the state, as the formerly routine review and approval process has fallen under intense scrutiny in a highly charged political environment.

The rates, approved Sept. 13, applied only to policies sold after some of the first provisions of the Patient Protection and Affordable Care Act went into effect Sept. 23. Premiums will go up for existing customers in January 2011 if they renew policies.

The price of coverage for new individual Anthem Blue Cross and Blue Shield customers went up by as much as 47%. The average rate increase for new coverage was 22.9%. For existing customers, the average rate hike, starting Jan. 1, was 16.6%, less than the 23.5% average Anthem sought.

The increases for new customers first attracted attention from state Attorney General Richard Blumenthal, a Democrat who is in a race for the U.S. Senate. He wrote to Connecticut State Insurance Commissioner Thomas Sullivan, an appointee of Republican Gov. M. Jodi Rell, urging him to reconsider his recent approval of rate increases for new Anthem Blue Cross individual coverage. Rell, who is not running for re-election, is appearing in radio ads for the Senate campaign of Republican Linda McMahon, Blumenthal's opponent.

State Healthcare Advocate Kevin Lembo wrote to Sullivan, urging him to reconsider. At least one state senator called for Sullivan's resignation.

Sullivan responded to Blumenthal saying, in part, "Since the attorney general has not provided this department with any new information, actuarial or otherwise, that hasn't been considered by my actuarial staff, we stand by our sound actuarial analysis."

Echoing insurers' frequent insistence that underlying medical costs drive rate increases, Sullivan wrote, "As I have said before, if the attorney general would like to have a meaningful impact on the rising costs of health insurance, I would welcome his assistance in joining me in continuing the dialogue of reducing and cutting costs from our medical delivery system."

Sullivan also received a letter from a member of the Obama administration, Jay Angoff, director of the Dept. of Health and Human Services' Office of Consumer Information and Insurance Oversight. He wrote to "express our deep concern" about the approval of Anthem's rate increases.

Angoff noted that Connecticut, like 47 other states and the District of Columbia, was awarded a $1 million grant in September to assist the department in reviewing rate increase requests. He said it was "surprising" that in light of the grant, the insurance department had not conducted any public hearings or made public any correspondence between the department and the insurer.

Unlike in many other states, Connecticut's insurance commissioner can reject or lower requested rate increases -- as Sullivan did for the proposed rate increase for Anthem's existing individual customers -- and his office conducts actuarial review of rate filings.

In reply to Angoff, Sullivan wrote that his office hadn't yet received its promised grant money, and that the office would beef up its review process as it proposed to do once that money is received. Sullivan acknowledged on Oct. 20 that the money had arrived, after his correspondence with Angoff.

But Sullivan also said rates were justifiably going up in some cases where bare-bones plans had to be adjusted to comply with the Patient Protection and Affordable Care Act. Anthem blamed new health system reform law requirements for its rate hike.

"As a former state insurance regulator, you yourself are aware of the inescapable correlation between the benefits provided and the rates needed to cover those benefits," Sullivan wrote.

The Obama administration has criticized insurers and others for suggesting that health system reform is to blame for rate increases, particularly because in some cases the increases insurers seek are similar to what they sought in past years. In a Sept. 9 letter to America's Health Insurance Plans, the trade group for insurers, HHS Secretary Kathleen Sebelius said there will be "zero tolerance" for "misinformation and unjustified rate increases."

The Connecticut State Medical Society has been critical of the way the increases were approved without public scrutiny. The society supported state legislation introduced this year that would have required the state to host public hearings regarding all health insurance rate increases. The insurance commissioner testified against the legislation, and the bill failed to pass.

"Our concern is that it's hard to tell whether there's any merit to the increases proposed, or the increases granted," CSMS Executive Vice President Matthew Katz said. "All we have heard is a lot of public rhetoric."

He said despite suggestions that increasing medical costs made it necessary to raise premiums, physicians haven't seen commensurate increases in what Anthem is paying them for care.