A second insurance company in California has killed plans for double-digit rate hikes for individual policyholders because of errors in its filing that would have inflated premiums, state regulators said Thursday.
Connecticut-based Aetna Inc. had sought an average 19% increase in rates for its 65,000 individual customers, but pulled back after multiple math errors in its paperwork were found by its own staff and by an independent consultant working for the state.
Aetna's decision follows a similar move by Anthem Blue Cross, which canceled a rate increase of as much as 39% for many of its 800,000 California policyholders in April after the state consultant found calculation errors in its filing with the California Insurance Department.
After the Anthem discovery, the state consultant began a review of paperwork submitted by Aetna and Blue Shield of California justifying proposed rate increases. The filings of a fourth insurer, Health Net Inc., also will be scrutinized, regulators said.
An Aetna spokeswoman said the company found "a miscalculation not previously detected" when it conducted a third round of internal reviews.
"This was a simple human error," said spokeswoman Anjanette Coplin, who did not elaborate. "As soon as we uncovered this mistake, we informed the California Department of Insurance."
Coplin said the error would have no effect on California policyholders because the proposed rates had not been put in effect.
But the trouble with the Aetna and Anthem rate filings prompted regulators Thursday to step up pressure on insurers to disclose their filings. The filings show how they plan to spend at least 70% of their premiums on medical claims, as required by state law.
California Insurance Commissioner Steve Poizner announced that all new health insurance filings in the individual market would be posted on his department's website, a significant departure from the customary practice of regulators privately reviewing the records.
"First we found major problems with the Anthem Blue Cross rate filing," Poizner said. "Now additional scrutiny has revealed that Aetna's filing has significant mathematical errors."
"Given that two of the four major health insurers [in California] have provided rate filings containing math errors, I believe an additional level of transparency is warranted," Poizner added.
Even with the new disclosure requirements, regulators have limited authority to block rate increases. They can do so only if insurers fail to spend at least 70% of their premiums on medical claims.
In Aetna's recent rate filing, the insurer said its plan met the 70% minimum. But once the errors were identified, medical-claim spending fell below the 70% requirement. The proposed rates were higher than they should have been, officials said. Aetna notified regulators of its mistakes this week, about the same time the state's consultant reported the problems.
"There were multiple errors … in the way [Aetna] annualized premiums and in the compounding of the rate increase," said state Insurance Department spokesman Darrel Ng.
Aetna's decision comes amid efforts by state and federal officials to clamp down on soaring rate hikes for individual policyholders and small businesses.
The nation's new healthcare law gives the Health and Human Services secretary the authority to review "excessive" premium increases, without defining the term. The law also will require insurers to spend at least 80% of their premiums on medical care.
Lawmakers in Sacramento and Washington are debating new bills that would beef up regulators' authority to approve or deny rates. One such bill in the California Legislature was approved this week by the state Senate's health committee.
Consumer advocates applauded the withdrawal of Aetna's rate filing, seeing the move as part of a broader effort to rein in insurance companies.
"It seems like there is a lot of momentum building toward rate regulation," said Jamie Court, president of Santa Monica-based Consumer Watchdog. "Insurers have to worry about that because they haven't had anyone looking over their shoulder."