The Connecticut Insurance Department has turned down a request by the state's largest health insurer to raise premiums by 12.9 percent for more than 25,000 individual-market policies, instead granting the company a 3.9 percent increase.
Anthem Blue Cross and Blue Shield had said that the higher increase was needed to account for rising claims costs, increased use of services by members, and state and federally mandated benefit changes.
But the insurance department found that a smaller increase was appropriate. Actuary Paul Lombardo wrote that the lower figure was based on reducing the operating margin for the plans and removing "underwriting wear-off" from Anthem's calculations. Underwriting wear-off refers to the decline in members' health status since they first bought the policies, making them poorer risks.
The 3.9 percent increase could take effect Jan. 1 for about 25,000 policies covering an estimated 48,000 state residents who buy private insurance on their own rather than through their employer.
Anthem spokeswoman Sarah Yeager said the company is reviewing the department's decision.
"We share our members concerns over the rising cost of health care," she said. "The increasing demand for medical services, including the use of new, expensive prescription drugs, and demand for advanced technologies are driving up the cost of health care at an unprecedented rate."
The rate request was one of several filed by insurers for individual-market health plans in recent months. Anthem's requests have drawn particular attention from consumer advocates in recent years, and some proposals have led to criticism of the insurance department.
The plans covered by the rate request include some that were subject to controversial double-digit premium increases last fall after they were changed to include new requirements of the federal health reform law. Consumer advocates blasted the insurance department for approving the request without a public hearing, but Anthem and the insurance department defended the decision, noting that the premium hikes paid for large increases in coverage, including a jump from $500 in prescription drug benefits to $750,000 in some policies.
Other policies covered by the request were subject to a controversial proposal last year to raise rates by 19.9 percent. Then-Acting Insurance Commissioner Barbara C. Spear rejected the proposal after a contentious public hearing, granting the company no increase on those policies. In that case, the department also took issue with Anthem's contention that underwriting wear-off contributed to a need to raise premiums.
This year's Anthem request was addressed without a public hearing. Advocates have pushed for more hearings on rate filings, citing last year's hearing on Anthem's proposal--and its subsequent rejection--as an example of what hearings can accomplish. Legislators this year overwhelmingly passed a bill backed by advocates that would have created a new public review process for requests to raise health insurance premiums by 10 percent or more, but Gov. Dannel P. Malloy vetoed it, arguing that it was unnecessary. Malloy's insurance commissioner, Thomas B. Leonardi, criticized the bill as an unnecessary mandate and said that the department's review of rate proposals should be handled in an actuarially sound way that is not driven by public hearings.
After Malloy's veto, Leonardi, State Healthcare Advocate Victoria Veltri, the Malloy administration and Democratic lawmakers reached a compromise, under which Leonardi agreed to hold up to four public hearings a year at Veltri's request on proposals to raise premiums by 15 percent or more. So far, none of the individual market requests have met the threshold.
The department takes comment on all rate proposals, and on the Anthem request, received one, although it did not address the proposal itself.
Veltri said Wednesday that she was pleased with the insurance department's decision and happy to see it protecting consumers from "an unwarranted rate increase." She said she thinks the department has been giving rate filings more scrutiny than in the past.
"The underlying data didn't seem to support the 12.9 percent and I was glad to see the department agreed with that," she said.
Several other requests to raise rates on policies for individuals are still pending.
Those include a request by Golden Rule Insurance Company to raise premiums by 2.4 percent over four quarters, or 9.9 percent over the year on plans that cover more than 11,000 members. Celtic Insurance Company is seeking to raise premiums for 376 people by 3 percent per quarter, or 9.3 percent for the year, beginning April 1, and Globe Life and Accident Insurance Company requested a 9 percent premium hike for one policyholder beginning in December.
The insurance department approved a request by Golden Rule to raise premiums by 14.3 percent beginning in April. The company said medical costs were already 22 percent higher than expected when the rates were developed.