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The state's largest insurer has won approval to raise health premiums by as much as 47 percent for policies sold to individual buyers, the largest price hikes seen in Connecticut since the adoption of national health care reform.
Anthem Blue Cross and Blue Shield has received approval to raise rates on those individual market plans by at least 19 percent — including a range of 30 to 44 percent for the brand that was most popular in 2009, Century Preferred.
The new federal health reform mandates are the reason for the increases, according to Anthem and the state Department of Insurance, which is defending its approval against a challenge by Attorney General Richard Blumenthal.
Those reforms took effect Sept. 23; the rate hikes took effect by Oct. 1.
The latest round of increases — approved without change last month by the Insurance Department — will affect relatively few Connecticut families. In all, the Anthem individual plans were in use by 55,536 people in the state as of April 2009, the latest figures available, and many of those customers will have their old policies "grandfathered" in, with smaller increases in 2011. Others get group insurance sold through employers.
But the Anthem rate hikes are likely to fuel a debate over whether such increases are justified by the costs insurers will have to pay to cover new mandated benefits. The increases come just weeks before all health insurers are expected to make separate requests for higher rates for 2011, which one recent forecast says will be an average of 11 percent more for group plans.
Individual plans could come in much higher.
Anthem's rate hikes "deeply disappointed" Blumenthal, who wrote an Oct. 6 letter to Insurance Commissioner Thomas Sullivan saying the increases were approved without detailed scrutiny or consideration of whether they are "excessive" under state law. Blumenthal also attacked rates approved for Aetna, saying the company didn't provide information to justify the rate hikes and it didn't spend enough of its revenue from premiums on customers' medical expenses.
"Rates are excessive when they exceed what is justified by the facts," Blumenthal told the Courant Thursday. "The only way to determine whether something is excessive or justified by the facts is to review the facts. That has not happened in these cases."
Insurance Department spokeswoman Dawn McDaniel said the department conducts "a thorough review of all rates filed based on sound actuarial principles. Credentialed actuaries review every rate filing objectively and run an analysis based on many factors, including actual claim data, projected estimates for future utilization, and medical cost trends."
Blumenthal did not give a breakdown of plans and prices in his letter, but documents obtained by The Courant from his office show price increases for a single male, age 40, ranging from $932 to $1,438 per year for Century Preferred plans. Increases could be higher for family coverage purchased by individuals.
The rate increases approved for health insurers took effect in late September for some plans and Oct. 1 for others. Health insurers will ask regulators later this month or next month for additional increases to take effect Jan. 1.
Blumenthal is asking Sullivan to reconsider the rates. Sullivan has responded by saying the rates include "very rich benefits" required by federal law.
"The rates that were filed and approved reflect the current cost to deliver care and the impact of more comprehensive benefit designs required under the federal healthcare reform law," Sullivan said. "If the attorney general wants to complain to someone, he should be complaining to Congress."
Health insurers submitted proposed rates last summer for individual-market plans sold after Sept. 23 that will include new mandated benefits. But Aetna also sought quarterly adjustments based on rising medical costs, for group plans as well as individual plans.
Aetna asked for 24.7 percent over last year for small-group HMO plans and received an average 18 percent for all of the company's small-group plans, and 14.2 percent for large-group and middle-market plans. In the individual market, Aetna prices are 6.4 percent to 7.5 percent higher for new customers, but existing customers won't see a change.
Any debate about premiums eventually comes to a central question: How much insurers should spend in medical care for every dollar they collect in premiums — known in the industry as "medical-loss ratio." Insurers are caught between investors, who want to see a low percentage spent on medical expenses, and federal reform, which will require insurers next year to spend 80 percent of premium revenue on medical expenses in the individual market.
Anthem did not provide the ratios in its filing. When asked by the Insurance Department to provide the ratios, Anthem responded by saying it will explain how much it pays for medical expenses when it files 2011 rates.
Aetna's filing shows that it paid 53 cents on medical expenses for every dollar collected in premiums in 2009, for plans in Connecticut in the individual market. Blumenthal asks state regulators how Aetna could be approved for a rate hike when the insurer isn't spending nearly the 80 cents per dollar that will be required next year.
Aetna spokeswoman Susan Millerick said, "With regard to future minimum loss ratios, the detailed federal rules have not been issued as to what will be required. However, it is our intent to comply with those rules when finalized, as well as with applicable state laws."
It is not clear how many people are paying, or will pay, the new Anthem rates because federal reform allows insurers to "grandfather" certain plans that existed before reform was passed in March. Anthem customers who enrolled in a plan before March 24 have the option of staying in it; those plans will not include the mandated new benefits and will not see rate hikes approved recently. Anyone who bought an Anthem plan on March 24 or later will pay the new rates.
In terms of higher rates, Anthem spokeswoman Sarah Yeager attributed the rising price to robust new benefits that the plans hadn't offered before federal reform.
"Our … individual products include expanded benefits such as elimination of lifetime dollar maximums, no cost share for preventive coverage and extension of dependent coverage to age 26," she said. "With this enhanced coverage, pricing levels have also been adjusted to make sure that the cost of claims incurred is offset by the premiums collected, and that we anticipate the cost of future, expected claims. Low-cost, low-benefit plans experienced a higher rate adjustment because with the health care reform provisions the plans now offer richer benefits. Other plans that already offered rich benefits did not experience as much of an adjustment."
Anthem offers at least 17 different plans in the individual market. The company illustrated its rate changes by using an example of a single 40-year-old male — how much more he would pay for the upgraded plans which include new benefits mandated by reform. For that 40-year-old man, Anthem's Tonik plans are now 41 percent to 46.9 percent more expensive than they were in early 2010. BlueCare is 30 percent higher. Century Preferred plans are up 29.7 percent to 43.6 percent, and Lumenos is 19.5 percent to 29 percent more expensive.
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