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CA Department of Insurance

Major health insurer imposes unreasonable rate on California businesses

News: 2014 Press Release

For Release: December 18, 2014
Media Calls Only: 916-492-3566
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Major health insurer imposes unreasonable rate on California businesses
Aetna’s gift to California’s small businesses—a hefty increase in health insurance rates

SACRAMENTO, Calif. - Insurance Commissioner Dave Jones announced today that his department actuaries found Aetna Life Insurance Company's recent rate filing on its small group policies both excessive and unreasonable. The average increase of 10.7 percent is effective January 1, 2015 will impact more than 64,000 individuals. For small business with renewal dates in the first quarter of 2015, the maximum increase is 19.5 percent.

"In the final days of 2014, one of the best gifts California small business owners could receive would be the promise of reasonable health insurance rates for the new year," said Insurance Commissioner Dave Jones. "Unfortunately, California law does not protect consumers and businesses from excessive and unreasonable health insurance rates. The ongoing trend of unreasonable rate increases imposed on California businesses and families over the last decade is likely to continue in 2015."

Department of Insurance actuaries reviewed the rate filing submitted to the department and found that the average 10.7 percent increase unreasonable. Unfortunately, Aetna's small group policyholders were charged an unreasonable rate in 2014 after the department found its April 2014 rate increase unreasonable, and 2015 is not any better, as policyholders face another unreasonable double-digit rate increase.

After the Department's health actuaries completed their analysis of the rate filing, the results were shared with Aetna's leadership and the department requested they reduce the rate. Aetna is moving forward with this unreasonable rate increase, which will cost small businesses a projected $23.5 million in excessive premium, based on the company's own projections.

Media Notes: The Department of Insurance actuaries found this rate increase unreasonable based on a number of factors:

Aetna's Morbidity Adjustment is Unreasonable

The company's assumption that members in the new ACA-compliant plans are less healthy than members in the older plans contradicts Aetna's actual experience. Moreover, any such adjustment should be offset by the federal risk adjustment program, so this should not result in a rate increase.

Utilization Assumptions

The company's assumption that utilization will grow by 2.5 percent in 2014 and 2015 in unjustified. This assumed growth in utilization is excessive given the recent history of utilization growth in the company's health plans and current trends among carriers.

Aetna's Extra Loading to the Rates for Groups Issued or Renewed during 1Q2105 is Inaccurate

The company has applied its pricing trend over a full quarter using an annualized trend rate of 9.4 percent. The company should have applied the pricing trend to only one and one-half months. Also,the trend rate used (9.4 percent) is larger than and inconsistent with other trend assumptions used in the filing.

Audio recording of today's conference call is now available:

The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $310 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $469 million in claims and premiums. Please visit the Department of Insurance website at Non-media inquiries should be directed to the Consumer Hotline at 800.927.4357. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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