A woman strides past the Hartford, Conn., headquarters of Aetna, Inc. (Bob Child / Associated Press )
Despite objections from regulators, health insurers Blue Shield of California and Aetna Inc. are proceeding with double-digit rate increases that state officials said were unreasonable.
Officials at the California Department of Managed Health Care said increases that average more than 11% for about 47,000 individual and small-business policyholders of Blue Shield and Aetna were unreasonable. But state officials don't have the authority to reject changes in premiums, and increasingly health insurers refuse state demands to lower rates.
"I am disappointed that after lengthy negotiations, Blue Shield and Aetna were unwilling to bring their proposed health plan increases down to a reasonable level," said Brent Barnhart, director of the Department of Managed Health Care.
Barnhart said negotiations were more productive with Anthem Blue Cross, the state's largest for-profit health insurer and a unit of industry giant WellPoint Inc. He said Anthem agreed to smaller rate increases for 202,000 individual and small-business policyholders that will save consumers about $13 million.
The state also said Anthem would forgo an additional rate increase for certain small employers this year, saving an additional $6 million.
Aetna agreed to a modest decrease for 20,000 small businesses that will save them about $300,000, Barnhart said.
Last year, Aetna led the way for the industry's more defiant stance by proceeding with an 8% rate hike on some small-business policyholders despite objections from the state insurance department. In January, California Insurance Commissioner Dave Jones scolded Anthem for proceeding with an 11% premium hike for small businesses that he determined was excessive.
Regulators and insurers often spar over estimates for patients' future medical use and costs that are used to justify these changes. Officials have been scrutinizing those numbers as the growth in U.S. healthcare spending hits historic lows.
State officials have also objected to some health insurers charging people more this year to recoup fees related to the federal healthcare law that don't take effect until next year.
Jones is expected to criticize another rate increase from Blue Shield at a news conference Thursday in Los Angeles.
Blue Shield, a San Francisco nonprofit insurer, said the latest rate increases for nearly 30,000 individual customers, which became effective Friday, were justified based on rising medical costs and continued losses in its individual business. Some of its policyholders are paying as much as 20% more.
"Unfortunately, the cost of hospital and physician services, prescription drugs and diagnostic tests continues to rise," company spokesman Steve Shivinsky said. "Blue Shield has lost tens of millions of dollars in the individual market in recent years, and we expect similar losses in 2013."
Aetna said it has agreed to cut its latest increases by about $1.5 million. "We take our commitment to our small-business customers seriously and are making every effort to maintain an affordable array of products," company spokeswoman Anjie Coplin said.
Starting in January, under the federal healthcare law, individual policyholders should have more options under a state-run insurance exchange. Health insurers must submit their proposed rates for 2014 to the exchange, called Covered California, this month.
Meanwhile, a ballot initiative scheduled for November 2014 would grant state officials the power to deny unreasonable increases for health coverage. The insurance commissioner has that authority for property and auto policies under Proposition 103.
Jones has called that lack of rate review a "huge loophole" in California law and in the federal Affordable Care Act.