Cuts to Anthem's rate hikes are not for everyone

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Cuts to Anthem's rate hikes are not for everyone

Oversight of Anthem Blue Cross individual plans is split between two health insurance regulators. One group is getting a break on cost increases. The other is not.

By Duke Helfand, Los Angeles Times

April 8, 2011

Nearly 151,000 Anthem Blue Cross individual policyholders face rate hikes of as much as 26% on May 1, even though far more Anthem individual customers are getting a break this year.

The difference is a result of California's two-headed health insurance bureaucracy.

About 600,000 people with Anthem policies under the supervision of state Insurance Commissioner Dave Jones will see smaller-than-expected increases July 1.

Anthem agreed to cut those rate hikes to 9.1% on average, from 16.4%, amid pressure from Jones and consumers. The Woodland Hills insurer also postponed plans to raise deductibles and co-pays for medical care until January.

Left out were 150,983 customers with individual plans overseen by the Department of Managed Health Care, an agency under California Gov. Jerry Brown. Anthem, the state's largest for-profit health insurer, said it would raise rates an average of 16% for these subscribers May 1, in addition to hiking deductibles and co-pays.

Many of the policyholders facing bigger rate increases said they were surprised to learn that their individual plans were regulated by the managed healthcare department. They said they had believed — incorrectly — that they too would get a break on rates and other costs, like most other consumers with individual policies from Anthem.

"I feel shock and fury as much as confusion," said policyholder Cathy Kay, 54, a healthcare attorney in Sherman Oaks.

Kay said she faces a 17% hike as well as an increase in her deductible from $2,500 to $2,950, even though she already met the lower deductible in January.

"Everything I read had quotes from Blue Cross saying they were going to roll these rate increases back," she said. "They're playing fast and loose."

The managed healthcare department said last month that Anthem's May 1 rate changes were vetted by an outside actuary and not found to be "unreasonable or unjustified."

But after Anthem agreed to cut its rate hikes for the 600,000 customers under Jones' jurisdiction, the managed healthcare department took a second look at Anthem's filing.

The department found that 121,000 of the Anthem policyholders it oversaw would be paying more for comparable products than those overseen by Jones. The difference was three to four percentage points for these consumers, who have preferred provider organization policies, officials said. (The remaining 30,000 customers under the managed healthcare department did not have comparable products.)

On Thursday, the department asked Anthem to justify the cost differences and report back by April 25 — days before the new rates take effect.

"This is unfair to consumers, and we're asking the plan to explain why these rates are not unreasonable or unjustified," department spokeswoman Lynne Randolph said.

Anthem said it had proceeded with its rate increases only after they underwent a thorough review by the managed healthcare department and its independent actuaries.

The company pointed out that costs are sometimes higher for policies under the managed healthcare department because of mandates that require policies to include extras such as maternity coverage.

Anthem spokeswoman Kristin Binns said the company lost money on its policies with the managed healthcare department last year and expects to do so again this year, even with the higher rates.

"The rate increases in the individual market are not unique to Anthem, but rather represent an economic reality faced throughout the entire industry and reflect the fact that healthcare costs continue to escalate faster than the growth of premiums," Binns said.

Consumers typically do not know which regulator has jurisdiction over their policies. Neither regulator could fully explain why some PPO policies are overseen by one agency or the other.

Anthem member Denis Robinson said he tried unsuccessfully to figure it out so he could complain about his May 1 rate hike of 26% and an impending increase in his deductible to $2,950 from $2,500. "It is a maze," he said.

Consumer advocates also are puzzled. On Thursday, the group Consumer Watchdog called on the governor to merge the two regulators under Jones' Department of Insurance, which has a large staff of actuaries devoted to analyzing insurance filings.

"Having two regulators is like having two DMVs — one for cars and one for trucks," Consumer Watchdog staff attorney Jerry Flanagan said. "The insurers take advantage of that split by playing off the strengths and weaknesses of one regulator over the other."

duke.helfand@latimes.com