Aetna withdraws Calif. health insurance rate hike

Aetna withdraws Calif. health insurance rate hike after errors found by independent review


Shaya Tayefe Mohajer, Associated Press Writer, On Thursday June 24, 2010, 7:28 pm EDT

LOS ANGELES (AP) — Another health insurer has withdrawn a proposed rate hike after an independent review discovered errors in the complicated calculations the company used to justify boosting 65,000 policyholders’ rates by an average of 19 percent.

The review ordered by a California regulator discovered Aetna Inc.’s proposal incorrectly multiplied when converting the monthly premium into an annual one, and the rate increase was not compounded correctly.

The mathematical errors resulted in inflated rate hikes, but it’s unclear how far off the rates were because the insurer withdrew the rate hike before the review was completed, Department of Insurance spokesman Darrel Ng said.

The review was part of a broader regulatory move by Insurance Commissioner Steve Poizner, who earlier this month ordered independent reviews of all rate hikes for individual policies at the state’s four biggest insurers.

The top four companies control 90 percent of the market for the 1.1 million individual health policies regulated by Department of Insurance. The Department of Managed Health Care regulates another 1.4 million such policies.

In a statement, Aetna said it conducted a third round of internal reviews of the rate hike and “found a miscalculation not previously detected. This was simple human error.”

A proposed increase from Blue Shield is currently under review, and future increases from Anthem Blue Cross and Health Net Inc. will be reviewed.

In California, insurers are required to spend 70 cents of every dollar collected in health insurance premiums on medical benefits.

In April, Anthem Blue Cross withdrew a plan to hike rates 39 percent for some customers after facing similar scrutiny and broad public criticism.

Anthem’s rate hike was repeatedly held up by President Barack Obama as an example of a broken health care system in the run up to the vote on the federal health care reform bill.

Anthem withdrew its hike one day after its parent company, Wellpoint Inc. of Indianapolis, announced its first-quarter profit soared 51 percent.

Poizner has pledged more transparency in the process of health insurance rate hikes because two of the four major health insurers have submitted erroneous filings.

“I have decided to take the exceptional step to post future individual health insurance filings on the Department of Insurance’s website,” said Poizner. The move will “allow any member of the public to scrutinize these rate filings and will, in the end, minimize rate increases by keeping markets as competitive as possible.”

(This version CORRECTS number of policies regulated by the Department of Insurance.)