Consumer Federation of California

Anthem Blue Cross plans to go ahead with a 10.6% average annual health insurance rate hike on small business owners, despite the fact that an examination by California Insurance Commissioner Dave Jones found the rate increase to be unreasonable and unsupportable, the Insurance Commissioner announced yesterday.

An initiative measure that will appear on the next general election ballot would give California the authority to publicly review rate increases, and reject those that are excessive. Unlike most states, California law allows unreasonable rate increases to take effect.

"Health insurance rates have risen five times greater than the rate of inflation over the last decade, by 153%," said Jamie Court, president of Consumer Watchdog. "It’s outrageous that California, unlike most other states, can’t protect patients from unreasonable health insurance rate hikes."

The federal health reform law requires review of some rate increases. However it fails to give states the power to reject rate increases that the data show are excessive or unreasonable. The law relies on the bully pulpit to shame health insurance companies into reducing unreasonable rates, a strategy that has proven ineffective, said Consumer Watchdog.

"Reviewing rate hikes isn’t enough when health insurance companies can simply laugh off findings that the facts don’t support their unreasonable increases. California families and businesses will continue to be burdened with excessive double-digit hikes until we have the power to say ‘No’ when health insurers set prices unreasonably high," said Carmen Balber, executive director of Consumer Watchdog.

This month’s unreasonable rate increase by Anthem Blue Cross is not the first to take effect in California, or across the country, because federal insurance regulators and regulators in around 15 states lack the power to say no when a rate hike is too high. In April, Aetna imposed an 8% rate increase on California small business customers despite the Insurance Commissioner’s finding that it was unreasonable. Anthem Blue Cross imposed an average 16% rate hike on 120,000 Californians with individual policies the prior year, despite the fact that the Department of Managed Health Care determined that the increase was unreasonable. This spring, a U.S. Department of Health and Human Services examination found that rate hikes in at least nine states were unreasonable, yet health insurance companies went ahead with the increases because HHS did not have the power to stop them.

Insurance reform law Proposition 103 regulates auto, home and business insurance rates in California, and requires insurers to open their books, publicly justify and get approval for rate increases before they take effect. That law, Proposition 103, was enacted by the voters in 1988 and has saved California drivers $62 billion on their auto insurance premiums. An initiative measure that has qualified for the 2014 general election ballot would extend Prop 103’s requirements for fair insurance pricing for the three lines of insurance that Californians must purchase, either by law or necessity – auto, homeowners and health.