Aetna Scraps 19% Rate Increase for Individual Policyholders

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The health insurer pulled back after multiple math errors in
its paperwork were found by its own staff and by an independent
consultant working for California.

A second insurance company in California has killed plans for
double-digit rate hikes for individual policyholders because of errors
in its filing that would have inflated premiums, state regulators said

Connecticut-based Aetna Inc. had sought an average 19%
increase in rates for its 65,000 individual customers, but pulled back
after multiple math errors in its paperwork were found by its own staff
and by an independent consultant working for the state.

decision follows a similar move by Anthem Blue Cross, which canceled a
rate increase of as much as 39% for many of its 800,000 California
policyholders in April after the state consultant found calculation
errors in its filing with the California Insurance Department.

the Anthem discovery, the state consultant began a review of paperwork
submitted by Aetna and Blue Shield of California justifying proposed
rate increases. The filings of a fourth insurer, Health Net Inc., also
will be scrutinized, regulators said.

An Aetna spokeswoman said
the company found "a miscalculation not previously detected" when it
conducted a third round of internal reviews.

"This was a simple
human error," said spokeswoman Anjanette Coplin, who did not elaborate.
"As soon as we uncovered this mistake, we informed the California
Department of Insurance."

Coplin said the error would have no
effect on California policyholders because the proposed rates had not
been put in effect.

But the trouble with the Aetna and Anthem rate
filings prompted regulators Thursday to step up pressure on insurers to
disclose their filings. The filings show how they plan to spend at
least 70% of their premiums on medical claims, as required by state law.

Insurance Commissioner Steve Poizner announced that all new health
insurance filings in the individual market would be posted on his
department’s website, a significant departure from the customary
practice of regulators privately reviewing the records.

"First we
found major problems with the Anthem Blue Cross rate filing," Poizner
said. "Now additional scrutiny has revealed that Aetna’s filing has
significant mathematical errors."

"Given that two of the four
major health insurers [in California] have provided rate filings
containing math errors, I believe an additional level of transparency is
warranted," Poizner added.

Even with the new disclosure
requirements, regulators have limited authority to block rate increases.
They can do so only if insurers fail to spend at least 70% of their
premiums on medical claims.

In Aetna’s recent rate filing, the
insurer said its plan met the 70% minimum. But once the errors were
identified, medical-claim spending fell below the 70% requirement. The
proposed rates were higher than they should have been, officials said.
Aetna notified regulators of its mistakes this week, about the same time
the state’s consultant reported the problems.

"There were
multiple errors … in the way [Aetna] annualized premiums and in the
compounding of the rate increase," said state Insurance Department
spokesman Darrel Ng.

Aetna’s decision comes amid efforts by state
and federal officials to clamp down on soaring rate hikes for individual
policyholders and small businesses.

The nation’s new healthcare
law gives the Health and Human Services secretary the authority to
review "excessive" premium increases, without defining the term. The law
also will require insurers to spend at least 80% of their premiums on
medical care.

Lawmakers in Sacramento and Washington are debating
new bills that would beef up regulators’ authority to approve or deny
rates. One such bill in the California Legislature was approved this
week by the state Senate’s health committee.

Consumer advocates
applauded the withdrawal of Aetna’s rate filing, seeing the move as part
of a broader effort to rein in insurance companies.

"It seems
like there is a lot of momentum building toward rate regulation," said
Jamie Court, president of Santa Monica-based Consumer Watchdog.
"Insurers have to worry about that because they haven’t had anyone
looking over their shoulder."

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Consumer Watchdog
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