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Santa Monica, CA –Anthem Blue Cross is again imposing an unreasonable rate increase on its small business customers, and California Insurance Commissioner Dave Jones announced today that the company will not budge on this excessive rate hike.

Working with an independent actuary, the nonprofit, nonpartisan Consumer Watchdog analyzed the data in Anthem’s rate filing and found the company should be lowering average annual premiums by 0.5%, which is about $17 million less than the 9.6% increase Anthem is imposing on the 7,000 businesses affected by the rate hike.  The total increase does not account for changes in benefits, which further increases the rate impact on businesses. Consumer Watchdog’s actuary, AIS Risk Consultants, found:

  • Anthem’s core medical loss trend of 10.9% (Anthem’s projection of the increased cost of medical care) is about 50% higher than is reasonable;
  • Anthem’s underwriting profit factor of 6.6% before taxes results in a 25% return on equity and is unreasonable;
  • In seven of the last eight years, Anthem had a return on net worth of more than 20% and $2.1 billion in income from its California health insurance business over those years; and
  • Anthem’s surplus has doubled since 2005 to over $1.3 billion in 2012 in addition to paying shareholder dividends of almost $900 million in the past five years alone.

“Anthem is overestimating future health care costs and padding its surplus to impose higher rates that cannot be justified," said Carmen Balber, Executive Director with Consumer Watchdog. “California’s small business owners can’t help put our economy back on its feet, or even provide their employees health coverage, if we allow insurance companies to rip them off with impunity. Unfortunately, the insurance commissioner has no power to stop insurers from overcharging.”

Consumer Watchdog provided its analysis as part of a Department of Insurance Affordable Care Act grant to review health insurance rate filings on the public’s behalf. The group’s evaluation of the rate hike, and the detailed actuarial analysis submitted, can be downloaded here: http://www.consumerwatchdog.org/resources/consumerwatchdoganthem4-1-13-1.pdf

Anthem has imposed repeated unreasonable rate increases on small businesses and individuals in California over the last several years, with no consequences. In January the health insurance company imposed an unreasonable rate hike on another 250,000 small business employees. Anthem imposed an unreasonable rate hike on 120,000 Californians with individual policies in 2011. Blue Shield and Aetna were also found to have imposed unreasonable rate hikes on their customers this year.

Unlike California, at least 35 other states have the power to approve or reject health insurance rate increases before they take effect.  California will be able to block unreasonable rate increases like Anthem’s, and order refunds of excessive rates, through an initiative measure on the November 2014 ballot that will require health insurance companies to publicly justify and get approval for rate hikes. That ballot measure is modeled after a successful California law regulating auto, home and other property insurance that has saved drivers $62 billion since 1988, according to the Consumer Federation of America.

California’s new health insurance exchange released a report last week projecting rate increases as high as 30% next year for middle class Californians. The report is further evidence that affordability could doom federal health reform if rate regulation is not enacted to hold down excessive premiums, said Consumer Watchdog.

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Consumer Watchdog has offices in Santa Monica, CA and Washington, DC. Find us online at http://www.ConsumerWatchdog.org