Connecticut denies 20% hike in Anthem premiums

The acting insurance commissioner in Connecticut has rejected a proposed rate increase request of nearly 20% by the state's BlueCross BlueShield insurer.

Anthem Blue Cross and Blue Shield of Connecticut, a subsidiary of for-profit Blues giant WellPoint, wanted to raise rates by 19.9% on individual insurance plans that are "grandfathered" and therefore exempt from many of the requirements of the Patient Protection and Affordable Care Act.

About 48,000 people are enrolled in the plans, according to Anthem's application.

In a ruling Dec. 3, acting Insurance Commissioner Barbara Spear denied the request by adopting the findings of hearing officer Mark Franklin (link).

Matthew Katz, executive vice president of the Connecticut State Medical Society, was among those who testified against the rate increase at a Nov. 17 public hearing.

"This case will stand as an example of why public hearings are necessary before regulators consider approving excessive rate hikes," he said in a statement following Spear's decision.

Opponents who testified at the hearing and publicly urged the commissioner to deny the request argued that the increase was too high for policyholders to bear in a depressed economy. But the decision wasn't based on what policyholders could or could not afford. Franklin found that Anthem's request was excessive, given faulty actuarial assumptions that overestimated the probable cost of anticipated claims. Anthem's current rates were adequate based on the department's estimates.

Anthem spokeswoman Sarah Yeager said the company was reviewing the ruling. "We understand and share strongly the concerns of our members over the rising cost and rate of utilization of health care services and the corresponding adverse impact on insurance premiums," she said in a statement.

Spear was appointed acting commissioner Nov. 12, just days before the hearing, after the resignation of Thomas Sullivan. In September, Sullivan granted Anthem higher rates for coverage written after health reform provisions kicked in. He resigned effective Nov. 1 to accept a job as a consultant.

Nancy-Ann DeParle, director of the White House Office of Health Reform, posted a note about the decision on the White House blog Dec. 6, noting that Connecticut was one of many states given $1 million in federal grant money to enhance rate increase reviews.

Even though the rate increase denial made national headlines, the bottom line probably won't change for WellPoint or other insurers, Goldman Sachs investment analyst Matthew Borsch wrote in a research note.

"This is mostly a distraction, and these rate battles are unlikely to have much impact on fundamentals," he wrote in the Dec. 7 note.