California Insurance Commissioner Dave Jones laid into Anthem Blue Cross of California on Wednesday, calling the health insurer's 8.7% rate increase this year on individual plans “unjustified and unreasonable.”
Jones has routinely criticized Anthem, a subsidiary of Indianapolis-based, publicly traded Anthem, and other insurers for raising premiums with little justification. And Wednesday's lashing came with political overtones—roughly six months ago, California voters rejected a ballot measure that would have given Jones' office the power to approve or deny rate increases.
“Anthem can change whatever it wants whenever it wants because the law in California does not give anyone the authority to stop excessive health insurance rate hikes,” Jones said during a media event. “We see them do it year after year.”
Effective April 1, Anthem raised premiums for individual health plans by 8.7% on average, affecting about 170,000 people. The rate increase applies only to grandfathered plans, or those that were purchased before the Affordable Care Act went into effect and do not meet all requirements of the healthcare reform law.
Jones said he approached Anthem executives about the rate hike and asked them to lower it, but they turned down his request. In a written statement, Anthem said it is meeting all regulatory rules, and the high costs of pharmaceuticals spurred the premium increase.
“This rate filing reflects the fact that escalating healthcare costs are an economic reality faced by the entire industry,” Anthem spokesman Darrel Ng said. “More high-cost, mass-market specialty drugs are expected to be released in the next year, putting further increasing medical costs contributing to higher premiums.”
Jones didn't buy Anthem's reasoning. He argued Anthem members are like frogs in a kettle slowly being boiled by higher monthly premiums. “That's exactly what's going on here with increase after increase after increase, which are simply unaffordable to many Californians,” Jones said.
He also said the rate hikes are a strategy to push more policyholders away from grandfathered plans and into exchange plans with narrow provider networks.
Thirty-five states grant authority to state insurance regulators to approve or veto rate increases for individual and small-group plans. A California ballot initiative backed by consumer advocates, Proposition 45, would have granted such authority, but 59% of voters ultimately said no to the measure in November. Anthem, Kaiser Permanente, Blue Shield of California and other health insurers spent millions of dollars in ads and campaigns opposing Prop 45.
But the Affordable Care Act includes some provisions to prevent excessive rate hikes. The law created a rate-review process in which HHS and states are able to review all rate increases of 10% or more for individual and small-group plans. Also, at least 80% of all premium dollars collected from individual and small-group plans must go toward covering medical costs, a provision called the medical-loss ratio.
Jones is not done fighting. He is supporting a state assembly bill that would give him the power to oversee rates proposed by Anthem and Blue Shield of California for PPO products.