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Regulator wants to bar Anthem from small-business health exchange

Insurance Commissioner Dave Jones says Anthem Blue Cross should be excluded from the health exchange for small businesses because it imposes excessive rate hikes.

June 13, 2013|By Chad Terhune, Los Angeles Times
  • “It’s critically important we have competition and choice, but at the same time we must hold health insurers accountable when they are raising rates unreasonably,” said California Insurance Commissioner Dave Jones.
“It’s critically important we have competition and choice,… (Rich Pedroncelli, Associated…)

California Insurance Commissioner Dave Jones wants industry giant Anthem Blue Cross barred from the state's new health exchange for small businesses because he says the company imposes excessive rate hikes.

Jones said the state's largest for-profit health insurer should be denied access to the state-run market where thousands of small employers will purchase health coverage for their workers. Covered California, the state agency implementing the federal healthcare law, said it would consider the commissioner's request alongside many other factors in deciding which insurers to pick.

This marked the latest clash between Anthem and Jones. He said he singled out Anthem for exclusion because it's the only company that has had three consecutive rate increases that were deemed unreasonable. The latest increase for about 37,000 workers and dependents is nearly 18%, on average, for the year.

Frustrated at his inability to block those higher premiums under state law, Jones said barring Anthem from the exchange offers a fresh opportunity to hold the company accountable for its conduct.

"We are doing everything we can to make sure there are consequences for these unreasonable rate increases," Jones said.

Reaction to the commissioner's move was mixed. Some healthcare experts said it's important for regulators to push back on ever-increasing rates.

But some business groups supportive of the Affordable Care Act panned the idea, calling Jones' move counterproductive and political grandstanding. Instead, they said the state should encourage more health insurers to compete for these small-business customers, and then allow this new market to determine winners and losers.

"The idea you would exclude one of the most widely chosen health plans in the state is ridiculous," said Micah Weinberg, a senior policy advisor at the Bay Area Council, an employer-backed San Francisco group. "All this would do is make health reform for the small business market less attractive."

The state has already picked Anthem Blue Cross as one of 13 insurers in its larger exchange for individuals that will be open next year to an estimated 5 million Californians who don't get health coverage through work.

The commissioner's request wouldn't affect that individual market or Anthem's ability to sell policies to small firms outside the state-run exchange. Anthem is a unit of industry giant WellPoint Inc., which runs Blue Cross plans in 14 states.

Covered California is expected to announce the health insurers and their proposed rates for the small-business exchange in August. In the first few years, the state estimates up to 200,000 small-business workers and their dependents may get coverage through the state's market for employers with 50 or fewer workers.

Peter Lee, executive director of Covered California, said the agency would discuss Jones' recommendation, and "We will make a decision between now and August on what makes the most sense for consumers," Lee said.

Anthem, meanwhile, said its rate increases reflect the "economic reality" of rising medical costs, and its exclusion from the exchange would only hamper competition. The company said its small-business rates are going up 11.5%, on average, for about 170,000 workers and family members.

Anthem and other industry critics sought to turn Jones' own words against him. Last month, Jones said he was troubled by the lack of health plans available in the state's exchange for individual consumers. At the time, Jones said "there are only three statewide health insurers selling in Covered California, which means less statewide competition than we'd hoped to see."

Patrick Johnston, chief executive of the California Assn. of Health Plans, an industry trade group, said now Jones is "suggesting that choice should be limited for small businesses. This seems contradictory."

Jones denied there was any conflict in his views. "It's critically important we have competition and choice, but at the same time we must hold health insurers accountable when they are raising rates unreasonably," he said.

Gerald Kominski, director of the UCLA Center for Health Policy Research, said he welcomed Jones' move and more drastic actions may be necessary at times to prod insurers to control costs.

"I think sitting somebody in the penalty box is a pretty strong signal that you cannot continue to abuse the market," Kominski said.

Thursday, Jones deemed unreasonable yet another proposed rate increase from Anthem. Anthem said its numbers were justified and rejected Jones' request for lower rates.

Jones criticized Anthem's previous increases on small firms in both January and April. He has objected to Anthem's estimates for patients' future medical costs as well as the company's collection of fees from customers that are not imposed under the federal healthcare law until next year.

Under state law, Jones can publicly declare an increase unreasonable, but he has no power to stop an insurer from imposing it. A ballot initiative scheduled for November 2014 seeks to change that and give state officials that power. The insurance commissioner has that authority for property and auto policies under Proposition 103.

Health insurers, doctors and business groups oppose the proposed ballot measure, saying it wouldn't address the underlying reasons for rising medical costs.

chad.terhune@latimes.com

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