June 22, 2010

When California’s four largest health insurers file proposed medical insurance premium increases with the California Department of Insurance (CDI), those increases will now get another layer of review by an actuary independent of the CDI.

“The difference now is that in addition to our internal actuarial review by staff, rate filings from any of the big four will be referred out to an independent actuary,” said Darrel Ng, Press spokesperson for CDI.

Blue Shield of California in San Francisco; Anthem Blue Cross of Oxnard, CA, a subsidiary of WellPoint Inc.; Aetna Inc. (NYSE: AET) of Hartford, CT. and Health Net Inc. (NYSE: HNI) of Woodland Hills, control about 90 percent of the market for individual health insurance in the state, Ng said.

Two of the four have filed proposed rate increases with CDI and the Department is using an independent company, Axene Health Partners LLC, based in Winchester, CA, to do the outside actuary review. Ng expects that to be completed by mid July.

CDI hired Axene when the Department’s internal actuary staff could not come to agreement with actuaries at Anthem Blue Cross over rate increases Anthem was proposing earlier this year. Axene discovered many mistakes that resulted in a rate increase that was 50 percent more than state law allows, CDI reported.

CDI chose Axeme to do its future independent actuary reviews because of Axeme’s past performance record, Ng said.

“Axeme Health Partners, through their work on the Anthem Blue Cross health filing, have shown their ability to closely scrutinize the filings and ultimately to find mistakes,” Ng said. “The last time they did one of these reviews the insurer decided to withdraw their rate hike after the numerous mistakes were exposed,” Ng said.

Health insurance companies do not have to get state approval of rate changes, but they do have to spend 70 cents of every dollar they collect in health insurance premiums on medical benefits.

Aetna has submitted a rate filing for an average 18.7 percent rate increase for individuals, which would amount to about $50 more per month on average, said Cynthia Michener, an Aetna spokesperson.

“We have worked collaboratively with the California Department of Insurance and Axene throughout this process,” Michener said. “We will continue to support the independent review of our rate renewal filing and work closely with Axene Partners to provide them with whatever information they need,” she said.

Insurance premiums are based on the cost of services in a particular geographical area, she said. She attributed the increasing rates to the increasing prices and usage of hospital care, prescription drugs, doctor’s visits and other services.

Ng agreed that Aetna has been cooperating.

“Aetna has been responsive to our requests for information, he said.

Blue Shield of California also has filed a rate change with the CDI. It is proposing an average 18 percent increase for 240,000 individual and family plan members, said Johnny Wong, a Blue Shield spokesman.