The Anthem Blue Cross headquarters in Woodland Hills. (David McNew / Getty Images )
California's largest for-profit health insurer, Anthem Blue Cross, is seeking to raise rates an average of 18% for more than 630,000 individual policyholders, drawing scrutiny from regulators and the ire of consumers already struggling with soaring premiums.
Some Anthem customers may see rates rise as much as 25% in February under the company's proposal at a time when medical inflation is running at historic lows nationwide.
The increases are among several others proposed by California insurers, including Aetna Inc. and Health Net Inc. California insurance regulators will take the next month to review whether these rate increases are warranted, but state officials don't have the authority to reject them for being unreasonable.
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California Insurance Commissioner Dave Jones said insurers can expect a thorough review by his agency.
"It's fair to say policyholders are dismayed time and time again at these rate increases they are forced to pay," he said.
Anthem customer Ellie Podway, 55, of Pasadena said she and her husband received a letter the day before Thanksgiving informing them of a 14% rate increase to $881 a month, effective in February. Since 2010, Anthem has boosted the couple's monthly premium 81%, she said.
"This is out of control," Podway said. "You feel like you're being sucker punched over and over."
Anthem, a unit of Indianapolis insurance giant WellPoint Inc., isn't alone in levying double-digit rate hikes.
Aetna, the nation's third-largest health insurer, wants to boost premiums 19%, on average, for nearly 70,000 individual customers in California, effective in April. Woodland Hills insurer Health Net raised rates last month 14%, on average, for more than 30,000 individual policyholders and their dependents statewide. Blue Shield of California is expected to file for rate increases for individual customers next week.
Industrywide, health insurers have been helped by historically low increases in medical costs the last few years as consumers postponed doctor's visits and other care to avoid out-of-pocket expenses in a sluggish economy. U.S. healthcare spending has grown less than 4% annually the last three years, according to government figures, the lowest rates in more than 50 years.
In its rate request, Anthem said its medical costs for this segment of the business are increasing nearly 11% and what it actually pays is rising 13.5% after adjusting for its portion after customer deductibles.
With those cost pressures, Anthem said that the profit margin on its individual insurance business in California is less than 1% this year and that it expects to lose money next year even with these proposed rate increases.
In addition to the 18% rate increase for about 630,000 customers, Anthem is seeking a separate rate hike of 15%, on average, for an additional 100,000 policyholders whose plans are regulated by the California Department of Managed Health Care. An agency spokeswoman said it is reviewing Anthem's proposed rate increase and those of other companies.
"We share our members' concerns over the rising cost of healthcare," Anthem spokesman Darrel Ng said. "The economic downturn continues to lead many healthy individuals to avoid purchasing coverage or to drop coverage altogether, leaving an insured pool that utilizes significantly more services."
Overall as a company, WellPoint has earned $2.2 billion in profit in the first nine months of this year and $2.6 billion in 2011. WellPoint runs Blue Cross plans in California and 13 other states.
In recent years, the rising cost of medical care and rate hikes for health insurance have been a major political issue that prompted congressional approval of President Obama's Affordable Care Act, much of which takes effect in January 2014, and calls in California for tougher state regulation of health premiums.
Anthem tried to raise rates up to 39% in 2010, sparking national outrage and helping Obama win support for his healthcare law. Anthem was forced to back down and accepted maximum rate increases of 20%. This year Anthem raised premiums 8% to 14%, on average, for about 700,000 individual policyholders and their family members.
The state's largest nonprofit health plan, Kaiser Permanente, is seeking an average increase of 8% for 220,422 customers, effective in January, according to state records. UnitedHealth Group Inc., the nation's largest health insurer, said it is trying to raise premiums 10% for about 5,500 individual policyholders in January.
These increases would affect many of the 2 million Californians who buy individual policies, but not the majority of Californians who are insured through employer group plans.
California employers said their health benefit costs rose 5.5% in 2012, according to a survey by benefits consultant Mercer.
A ballot measure scheduled for November 2014 would give the California insurance commissioner the same authority to approve or reject health insurance rate increases that the department now has over property and auto policies. Consumer Watchdog, the Santa Monica group that in 1988 championed Proposition 103 — which enacted rate controls on those other types of insurance — had tried to get the health insurance measure on this year's ballot.
Jamie Court, president of Consumer Watchdog, said the ballot initiative would enable the insurance commissioner to order refunds retroactive to November 2012 if health insurance rates are deemed excessive.
"Two years from now, the insurance companies might be writing big checks to consumers," Court said.