Three of the five largest health insurance companies in Connecticut received regulatory approval to raise their average 2010 rates on individual and group health plans by 12 percent or more, according to a legislative report.
The largest rate hike — 19 percent — was granted to Health Net of Connecticut for its policies sold to employers. Health Net recently completed a merger with United Healthcare.
Farmington-based ConnectiCare received approval to raise its average rates on policies sold to individuals by 11.8 percent, and its group plans by 14.5 percent, the report said.
Meanwhile, Anthem Health Plans received approval for an average rate hike of 16.5 percent on its individual health policies, and 12.88 percent on its group plans.
Additionally, the report, which was authored by the Office of Legislative Research, found that state regulators have approved rate increase requests from Connecticut’s largest health insurers in 22 cases out of 26 since 2006. In the four cases where original rate requests were rejected, the insurance department mandated smaller rate hikes.
Regulators reduced three requests in the past year alone, two that were proposed by Anthem Health Plans, which originally asked to increase its average 2010 rates on individual plans by 23.5 percent and group plans by 15.78 percent.
The rising costs of medical care and insurance premiums have been at the heart of the health care reform debate in Connecticut and across the country.
Public outcry about rate increases reached a boiling point in Connecticut last summer when it became public that Anthem Blue Cross was seeking to raise rates by as much as 32 percent on some individual health plans.
Sen. Christopher Dodd, state health care advocate Kevin Lembo, and Attorney General Richard Blumenthal, among others, complained that the increase was excessive and they urged state Insurance Commissioner Thomas Sullivan to reject it.
Sullivan agreed that the request was too high and his department subsequently approved a lower rate increase.
The legislative report has raised additional questions about the affordability of health insurance.
“It’s unfortunate that the insurance companies are still requesting double-digit increases,” Lembo said. “In this economic climate, any increase is too much. It’s a big concern.”
Insurance industry representatives say rising medical costs are the biggest driver in the rate hikes.
“It doesn’t surprise me that rates are going up because medical costs are going up,” said Keith Stover, a lobbyist for the Connecticut Association of Health Plans. “If medical costs are increasing, premiums are increasing.”
Sullivan agreed that rate increases are being driven by medical costs, which he said “are escalating at an alarming rate.”
In the past year, Sullivan said the average medical costs for group plans in Connecticut rose 13 percent to 15 percent, and for individual plans, 15 percent to 20 percent.
In 2008, the U.S. spent an average of $7,681 per person on health care for a total of $2.3 trillion, a 4.4 percent increase over the previous year.
Stover said the aging population, chronic illnesses related to obesity, increasingly expensive medical technology and defensive medicine being practiced by doctors are all causes for rising medical costs.
Stover added that the individual insurance market in Connecticut is “highly competitive,” and that profit margins in that segment remain tight for insurers.
“My sense is that the margin in this business is in the low single digits for insurers and that has been static in recent years,” Stover said. “But medical costs continue to increase.”
Lembo said it’s unclear whether or not the rate increases documented in the legislative report are justifiable because rate proposals made by insurers are not publicly available.
The report, which in some cases includes data for the past five years, represents the average rate increase requested and approved across all medical plans in each company’s individual and group portfolios.
Aetna has not submitted its rate proposals for 2010 because they don’t go into effect until July 1, the report said. In 2009, however, Aetna requested and received approval for a 12 percent rate increase on its individual plans.
The state Insurance Department does not have statutory rate review authority over Aetna’s and United Healthcare’s group business plans, and United doesn’t sell individual policies in Connecticut, the report said.
State Rep. Jim Shapiro, a Democrat from Stamford, said he asked for the report after a constituent raised concerns about his insurance premiums, which increased by 40 percent to 50 percent over a two-to-four year period.
Shapiro said on face value “the rate increases are too high.” He added that his biggest concern is that the state Insurance Department only disapproved rate-increase requests from the top insurers four times since 2006, according to the report.
“There is such a strong correlation between the huge rate increase insurance companies ask for and what they receive, that the insurance department is either not properly performing its regulatory function, or the regulations its following are not nearly strong enough to protect the public,” said Shapiro, who is a co-chair of the general law committee.
Blumenthal and others — in response to Anthem’s requested rate increase — proposed to reform how rate increases are granted on individual health insurance policies. Their suggestion included a mandate that would allow regulators to consider affordability in their rate decisions, and require public hearings for all rate increase requests.
Sullivan rebuffed Shapiro’s comments and said his office has adequate rate review authority.
“I have credentialed actuaries review every rate filing that comes into this office,” said Sullivan, who added that historic loss trends are the primary driver in determining rates. “Actuarial science is applied to every rate filing objectively, and we don’t take rate requests for granted.”
